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 Market Mysteries of the week

  Should I invest in bitcoin?  

Answer We’ll never tell you whether to invest in something or not. First, because it’s irresponsible to provide investment advice to a broad audience of varying financial situations. Second, because we don’t want you to believe that there are correct answers out there on picking investments. When you do pay for investment advice from a bank or financial advisor, it will be well-rounded and balanced. Because it’s way too hard to consistently be right on single investments. It’s the future. No one knows what will happen. Let’s break down how to think about it from an investment perspective.What is it?Bitcoin is the most popular cryptocurrency. Currency is in the name, but not everyone agrees that it is a currency. For anything to be a reliable medium of exchange, it needs a certain level of mass adoption and ease of use. Bitcoin’s not there yet, but many say it's trending in that direction. Some might say it’s like digital gold, because its value is based on our consensus desire for it. Basically, it’s a new digital thing that has as much value as we all say it does.What about NFT’s, dogecoin, and those other things my cousin’s boyfriend’s uncle was posting about?More digital assets. We’re at a point in technology where we can create objects that can't be replicated online. People might decide these particular objects, which represent ownership of a piece of art, or history, or often absolutely nothing, are valuable. If they keep buying them, the value of each one increases.Is it something I should invest in?That’s up to you. There’s nothing wrong with risk. It’s tough to grow without taking risk. Investing is taking a risk. It’s a bet on the future. It’s important to control how much and what kind of risk we take. We can decrease our risk of loss by diversifying our time or size of investments. Consider the growth timeline of a risky company like a young tech upstart. Some months or years are tough, and some are great. It’s hard to identify a specific three month period where it might grow. However, it’s easier to identify a ten-year period over which that company might grow. When investing, success is easier over a long-term timeline, especially when investing in something that swings significantly in value or performance. You can also reduce your overall risk of loss by limiting the size of an individual risk. If you put 100% of your savings into a single company or currency, your whole portfolio will swing by the amount of that investment’s swings. But if you own a lot of other investments, your whole portfolio will swing proportionately to those investments, delivering more of an average experience. The typical Scoop Investor usually starts with a fully-diversified portfolio, to make sure they’re getting the core average growth, then slowly adds in very small investments in companies they believe will perform above-average. How risky are crypto investments?VERY VERY RISKY. We would not call many of the random cryptos investments at all. Risk can be evaluated by how quickly things swing in value and for what reason. The total US stock market suffered one of the most severe crashes in its history last year, losing over 30% of its value over the course of a month, because the entire world economy shut down and a deadly virus threatened the lives of billions. Bitcoin lost over 30% of its value in a single week because Elon Musk tweeted that Tesla would stop accepting payment for its cars in bitcoin. Losing 30% of your portfolio value could happen anywhere you’re invested. It’s important to consider how frequently it could happen and whether you’re comfortable with why it could happen and why you think it would recover. Seeing how quickly something can rise is a good relative indicator of how quickly it could also fall. Be careful out there.If this was helpful, please forward to a friend! 

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