The year 2019 had proved to be a productive year for Bitcoin investors, given the unexpected rise that occurred. Although many analysts already started to look for similarities with the 2017 Bitcoin rally, the reality is that this time we have a price surge fueled mainly by the derivatives market.
With more and more people thinking about adding Bitcoin to their investment portfolio, is it the best thing you could do? Given that the market performance does not necessarily equal your personal portfolio performance, let’s see what are the aspects you should consider before including Bitcoin in your basket of assets.
Your risk profile
Some people like volatile assets and some people don’t. Some people are in favor of passive investing and some like active investing. We’re talking about different investing methodologies, but it all comes down to one thing: your risk profile. Investing carries the risk of you losing money over a given period of time and that is true for Bitcoin, as well. Depending on the risk you are willing to take, you can find out whether it could be a good decision to have Bitcoin among your assets.
If you generally invest in ETFs, mutual funds, or index funds, allocating a portion of your capital could not only make you feel uncomfortable in our decision-making process, but it will also distort your risk diversification model, given that Bitcoin will be the most volatile instrument in your portfolio.
The trading schedule
Dealing with volatility will require to allocate a lot of time to monitor your portfolio. Bitcoin is well-known for its dramatic surge in volatility from time to time and what that occurs, you’ll need to find in front of your desk for at least a few hours per day. You must understand from the start that if you want to invest in Bitcoin with providers such as easyMarkets, it will consume significantly more time.
You’ll also get involved in a market that’s trading 7 days a week, as compared to the other which are trading just from Monday to Friday. It is true that bigger volatility could result in bigger returns, but in order to exploit it, a greater amount of resources from your side (whether it is capital, time, study, etc.) will need to be allocated. If you reach the conclusion that both your risk profile and your trading schedule are suitable, then Bitcoin might be that missing piece from your portfolio.