Does Crypto Belong in Your Portfolio? | Newsletter Lite
Frank Kaberna \ Chief Content Strategist
Source: Yahoo! Finance
It’s become clear that attempting to understand the crypto market by comparing it to popular existing indexes is as lazy as describing an athlete’s talent or musician’s sound in terms of another athlete or musician. It doesn’t get to the root.
How > What
Traders might want to start with movement, and appreciating how cryptocurrencies move might be more helpful than why they move. Asking why in trading can often be moot no matter the market given that it’s probably moved by the time you asked.
Walk Before You Run
While this excitement has no doubt brought more participants to markets, which can be viewed as a very positive development for other financially active individuals, there is one potentially rough side to all of this:
Many entrants into markets are learning how to invest and trade using the most volatile asset class established in decades.
Of course, you have to cut your teeth somewhere but doing so with a product that has the potential to move thousands of dollars in a flash might not be the best way to kick off a long portfolio life. It’s seldom advisable to try anything new with its most chaotic version (examples include: swimming in deep end, hiking in Himalayas, option trading in naked short VIX calls).
It’s hard to put cryptocurrencies in a box. They move like nothing else currently in the market, and they don’t seem to be going away anytime soon. But until everyday traders get a smaller, more accessible product, they might want to put that box on the shelf.
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*Ethereum data from coinmarketcap.com as of 9/9/21