Is it worth investing in cryptocurrencies now?

“The time to buy is when there is blood in the streets,” goes the stock market adage that was once supposed to have been uttered by Baron Rotschild. This is how the most famous of the family of bankers, whose name is probably known to everyone, made his fortune. Is this the answer to the question of whether it is worth investing in cryptocurrencies at this time? Perhaps, although there are many others to this question.

Before investing in anything, it is important to remember the importance of diversification – that is, the separation of capital in different assets. Ideally, these assets should be uncorrelated or even have an inverse correlation. Properly conducted diversification should, however, give us some portion of the assets that will become more expensive at a time when another portion of them will become cheap. It is impossible to omit virtual currencies from such a statement, i.e. cryptocurrencies.

Risks pay off, but it’s worth minimizing them

Cryptocurrencies are regarded as risky assets, and indeed they are – especially if we don’t know too much about how to “bite” them. In turn, risk in investing can be seen in two ways – either, as something bad, or as a “springboard” that is able to give us potentially very high rates of return. If we already have bonds in our portfolio, precious metals real estate, stocks, ETFs and the like, we can consider buying cryptocurrencies. Precisely because at the right moment they can become just that “springboard” for our porfolio.

In a bull market, good cryptocurrency projects generally yield returns of several hundred percent. This means that investing 1% of our capital in such a risky market could, in due course, result in a it will no longer be 1% of the portfolio, but 5% or even 10%. Not because we will start adding capital to such assets out of greed, but because the cryptocurrency boom may multiply that 1%.

Is it worth buying Bitcoin?

Based on another stock market wisdom that says to “don’t get on a speeding train “, we may come to the conclusion that it is not worth waiting for the boom – the “train” is already unleashed then. It is safer – although in this case uncomfortable – to enter the “depot” when it is waiting on the platform…. And on top of that it’s empty, because everyone is afraid to enter it. Of course, entering the market in a bull market we can make money… the problem is that we never know exactly when this bull market takes place and – most importantly – when it will end.

At the time of writing this article, bitcoin costs approx. $28,000 per coin. Since the last peak, the “king of cryptocurrencies” has slipped by less than 58%, which means that if the largest cryptocurrency in terms of capitalization returns to its previous ATH (All-Time-High, the highest recorded value), capital put into BTC now can double in value or multiply even more if new peaks are reached. For smaller cryptocurrencies, returns can be even higher.

The question is, is blood pouring at this point? Rather not. It certainly poured in the last quarter of 2022, when bitcoin was oscillating around the $16,000. Those who bought then are already almost twice as high. Buy now, or wait for an opportunity when blood will be shed again – maybe even more blood than last time? About this Everyone must decide for themselves.

The content of the article does not constitute investment advice. Remember to make investment decisions according to your own conscience, knowledge and experience.