Bitcoin rose more than 9% and reached a total value of $ 50,000 CoinDesk Monday, but financial experts advise against investing much in cryptocurrency.
Since Bitcoin is risky due to its price volatility, financial advisors say it should make up less than 10% of an investor’s portfolio, according to data Investor’s Business Daily. For Empyrion Wealth Management Kimberly Foss, however, cryptocurrencies should not account for more than 3% to 5% of assets.
“I don’t actively recommend cryptocurrency,” he told the publication. “At this point in time, the market is unproven, unregulated and too prone to manipulation, both by actors with potentially dire motives and by other forces that are currently not well understood.”
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While Bitcoin and the cryptocurrency Ethereum are currently not experiencing a massive drop in value due to the popularity of cryptocurrencies, they typically drop more than 10% in a single day and as much as 80% in about a year, CEO of Sawchuk Wealth, according to Terry Sawchuk.
Unlike others, Sawchuk is more optimistic about cryptocurrency, as large institutions invest in Bitcoin and Ethereum, creating a “stabilizing force”.
Others, however, urged caution. For example, Ron Brown, President of RL Brown Wealth Management, recommended investing a maximum of 2% of assets in Bitcoin.
“Personally, I think 2% is the maximum I will accept for clients until the dust settles and we find out which currencies will survive,” he told Investor’s Business Daily.
On the flip side, Paul Schatz, president of Heritage Capital and treasurer of the National Association of Active Investment Managers, said the amount allocated to Bitcoin should be anywhere from zero to ten percent, depending on an investor’s risk tolerance.