| $150 billion wiped off cryptocurrency market in 24 hours as bitcoin pulls back | | |  | WED, JAN 13, 2021 | | | | Is bitcoin a smart investment?
While it has potentially high returns, it's extremely volatile. As we witnessed this week, bitcoin's value can drop very quickly and can reach some low prices.
One financial expert said that the case for cryptocurrency is that it is poised to disrupt a large segment of the financial services industry and is therefore a smart investment strategy.
Many supporters will be tell you that jumping on that bitcoin bandwagon can make you a great deal of money … if done strategically. They will tell you all about the benefits of bitcoin over traditional investments. For instance, unlike some other types of strategies, once you acquaint yourself with investing in a bitcoin platform, it's considered easy and can be done with just a few hundred dollars.
It's also considered a more liquid investment. You can hold it over a longer term, or you can also buy it and then trade it for other forms of assets. With bitcoin, the return on investment tends to be somewhat higher than with more traditional investment strategies.
Of course, as with any investment, there are going to be risks. Experts agree you should go into bitcoin investment understanding what some of those risks are and what that could mean for the ultimate value of your investment.
It can be volatile, probably the big downside to a bitcoin investment. Given the supply and demand nature of how bitcoin is traded, the volatility level on cryptocurrency is pretty high. Meaning, within a short amount of time it could lose a great deal of value, like it did this week. To that point, a financial advisor told me: "You should invest only the amount of money you feel comfortable putting in a garbage basket and setting on fire."
As with any investments, there is the good, the bad and the ugly that needs to be weighed when you're dealing with bitcoin. You have to take into consideration your risk level, the amount of money you wish to invest and your ROI expectations.
As one financial expert said: "Bitcoin could remain a niche, become mainstream, vanish without a trace or anything in between."
For more key stuff like this, please follow me on Twitter @jimpavia and check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow. | |
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