For starters, investors may want to first consider why they would want to trade bitcoin. After all, many market observers have stated that the digital currencies come with substantial risk. For example, European Union regulators warned in early 2018 that cryptocurrencies are “highly risky.”[1]
Legendary investor Warren Buffett has repeatedly warned investors about digital currencies, telling CNBC in 2018 that “in terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.”[2]
While some have warned about bitcoin’s risky nature, the digital currency has experienced some very impressive gains. In 2017, for example, Bitcoin’s price rose from less than US$1,000 to more than US$20,000.[3]
Bitcoin’s price has also frequently moved out of sync with the price of other digital assets, making it a prime candidate for diversification strategies.[4] Because the digital currency’s price movements do not follow those of other asset classes, incorporating it into a portfolio can help maintain greater stability.