Venturing into the dynamic and constantly evolving world of digital assets may feel overwhelming at first. In the past, many were wary of investing in cryptocurrencies due to their unpredictable nature and perceived risks. However, times have changed, and the global cryptocurrency market has blossomed into a thriving, diverse ecosystem since Bitcoin’s groundbreaking debut in 2009.
Is Volatility Always A Bad Thing?
The term “volatility” often carries a negative connotation, but let’s not overlook its potential benefits. Investors can witness both ups and downs, and it’s important to remember that there is also upside potential. Take bitcoin, for instance, hailed as the best-performing asset of the decade. However, its price is influenced by various factors like supply and demand, investor sentiment, and media hype. Even the most prominent cryptocurrencies experience fluctuations, leading to both gains and losses.
When a professional investment portfolio is carefully constructed, volatility can actually work in its favor. Skilled advisers can help by implementing frequent rebalancing and strategically placing buy and sell orders at specific thresholds. We’ve witnessed this phenomenon countless times as the adoption of digital assets has surged over the years.
Do Digital Assets Always Carry Too Much Risk?
Investors should strive for a well-balanced portfolio that doesn’t heavily rely on a single asset class, whether it’s digital assets or any other type of investment. The key here is diversification. By adding alternative assets to your portfolio, you not only mitigate the risk of concentration but also safeguard against inflationary environments.
It’s common for investment portfolios to allocate around 2% to digital assets. At first glance, this may seem like a tiny percentage. However, in practice, such an allocation can significantly minimize downside risk while offering tremendous potential for growth. Just think, a mere 2% allocation to Bitcoin over the past five years would have contributed a substantial portion to the overall portfolio’s growth.
But let’s not forget that an allocation this small shouldn’t consume the majority of an investor’s time and energy. That’s where financial advisers come in. They specialize in purposeful portfolio construction rather than haphazard decision-making. Advisers shoulder the burden of monitoring market conditions and recommending a rebalance schedule that aligns with the investor’s unique financial goals.
Are Digital Assets Doomed to Never Become A Mainstream Investment?
Even risk-averse investors may unknowingly have some exposure to the digital assets industry. Surprisingly, this includes well-established, trusted brands that have been traditionally slow to adopt disruptive technologies. Take Visa, for example. This global payments giant recently made headlines by expanding its stablecoin settlement capabilities, making it one of the pioneering payment institutions to do so.
While the digital assets industry is still relatively young, its potential use cases are vast and diverse. And let’s not forget the thrilling investment opportunities it presents, even in the face of volatility and risk. In fact, some investors find the volatility itself to be an enticing factor.
*Disclaimer: This article is for reference purposes only, not investment advice. You should research carefully before making any investment decisions.