Bitcoin (CRYPTO: BTC) is enjoying a run higher on the first day of February. The token is up 4% over the past 24 hours to US$38,391 (AU$54,332).
This comes after the world’s No. 1 crypto by market cap posted its worst month in January since 2018’s so-called crypto winter saw the Bitcoin price drop into the US$3,200 range.
Despite today’s gains, Bitcoin remains down 20% year-to-date and down 44% from its 10 November all-time highs.
The token has largely been treated as a risk asset, with investor concerns over rising interest rates seeing cryptos sold off alongside high-flying tech shares. The S&P/ASX All Technology Index (ASX: XTX), for example, is down 21% since mid-November.
And according to an industry expert, crypto investors face a more challenging outlook today than at any time over the past 18 months.
Beware Bitcoin’s volatility
FS Investments chief market strategist Troy Gayeski cautions crypto investors about the wild price swings, more down than up recently, witnessed across much of the sector.
According to Gayeski (quoted by Bloomberg):
Crypto is a very volatile asset class – and I hope that everyone participating in that market is aware of the volatility potential. It’s a much trickier environment than it was 6 months ago, 12 months ago, 18 months ago where it was ‘green-light go.’ Now it’s ‘yellow-light caution’.
If you are planning on investing in Bitcoin, be prepared for some big potential losses.
“I’ve always said if you’re uncomfortable waking up to a 30%, 40%, even 50% decline for whatever reason, you probably shouldn’t own it,” Gayeski said.
Outlook remains cloudy
Nicholas Cawley, Strategist at DailyFX, doesn’t see a big turnaround in the crypto markets any time soon.
According to Cawley (quoted by Bloomberg):
While the sell-off in Bitcoin has been relatively muted going into this week, the outlook for the cryptocurrency market as a whole remains negative with heavy losses seen across a range of once-popular altcoins. If the market as a whole is looking to Bitcoin to lead the way higher, it is most likely to be disappointed.
Proceed with caution!
The post Why investing in Bitcoin today is a much trickier environment: expert appeared first on The Motley Fool Australia.
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More reading
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- Thank Bitcoin for making this stock so cheap in 2022
- Is winter coming for the crypto world? A bull and bear case
The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Bitcoin. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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