“Bitcoin has asymmetric return potential. This means that the upside potential is statistically greater than the downside potential,” explains Mark Valek, investment specialist at asset manager Incrementum AG. As an investment advisor, he is familiar with portfolio management. When it comes to Bitcoin, he advises caution: “It is important to balance risk appetite with risk-bearing capacity, especially given the high volatility of BTC. The investment horizon plays a crucial role here.”
Long-term investors – also known as hodlers – are better able to ride out short-term fluctuations and benefit from long-term trends.
Investment horizon plays a crucial role
A Bitcoin-only portfolio poses risks for short-term investors. With shorter investment periods, the investment result is more subject to random movements – especially with increasing volatility proportional to the duration. Valek emphasizes that the temptation to make impulsive decisions caused by these fluctuations causes additional emotional stress.
The investor’s psyche faces a serious challenge when the market undergoes turbulent fluctuations and quick decisions are required, explains the financial expert.
For example, anyone who bought a Bitcoin for just under $69,000 on November 10, 2021 still had the equivalent value of $16,000 a year later. Of course, this also works in the other direction: you could have bought a Bitcoin for just $15,782 on November 22, 2022. At the time of writing, the same lot costs $42,950. That’s an increase in value of over 170 percent.
You can find out what you want to know about BTC in your portfolio and what the cryptocurrency is like in general in the new BTC-ECHO Bitcoin Report.
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