The cryptocurrency market, along with other riskier assets, is taking a huge hit.
Bitcoin is under eleven% in the last 24 hours, according to CoinGecko. Hitting its lowest level since August, the largest cryptocurrency by market value dipped below $40,000 on Friday and is currently trading at about $38,378. Some analysts predict that it could fall even lower.
Along with that, ether, the second largest, is below 14% in the same period. Currently being negotiated $2,779.
This comes like the Nasdaq and the S&P 500 suffer losses too. Cryptocurrencies and technology stocks have been falling at the same time this month, showing an increase correlation between the two.
In addition, there are concerns about the possibility of further regulation of cryptocurrencies in the US, as well as how the Federal Reserve potentially reducing its monetary policy would affect the market in general. Globally, other regulators are also targeting cryptocurrency markets. On Thursday, for example, the Russian central bank proposed to ban the use and mining of cryptocurrencies.
This drop is not unusual for bitcoin; Cryptocurrencies are known for their volatility. As soon as prices rise, they can fall again. Because of this, experts say it's important to consider whether you can handle the ups and downs before investing in bitcoin or any other cryptocurrency.
"It's a very volatile asset class," Anjali Jariwala, Certified Financial Planner, Certified Public Accountant, and Founder of fit consultants, previously told CNBC Make It. "You have to be comfortable with the changes and you also have to be comfortable losing your money."
Each investor's risk tolerance will vary. It is important to understand how much you can personally tolerate.
For some people, volatility "may be okay, that may coincide with your risk appetite and your own risk tolerance and investment time horizon," Douglas Boneparth, certified financial planner and president of Bone Fide Wealth, previously told CNBC Make It. "But, you still have to live with it."
Other investors may prefer something more stable.
Regardless of your tolerance level, financial experts warn that this volatility makes Bitcoin and other cryptocurrencies a riskier investment than something like a low-cost index fund, which allows investors to buy a collection of shares at a time. instead of betting on a single asset.
If you decide to invest anyway, "you have to make sure it's money you can really afford to lose," Jariwala said.
Boneparth agrees: "Be very careful about how much you allocate and understand what you can tolerate, because if 80% of your net worth is tied to bitcoin, and it's down 30%, that's tough."
Depending on what you can afford, a smaller allocation in bitcoin can cover any possible drop in the market.
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