Buffalo, NY (WBEN) New data shows 40 percent of Bitcoin investors are now underwater. Experts say the market is still volatile, in part because there isn't an exact idea of how much cryptocurrency is worth.
Glassnode reports investors are now underwater as the price rises and falls. That's one sign of volatility, says Niagara University's Ed Hutton who heads up the Financial Service Laboratory at the university. "It's one of the attractions of cryptocurrency is that people have seen that it's gone up so much. But then again, that on the other hand, what happens is you can see how much it goes down. And that's exactly what's happening right now," says Hutton. He notes after last fall's rush, some cryptocurrencies are down 50 to 60 percent.
Hutton says another sign of volatility is the exact worth. "Nobody really knows what they're worth," notes Hutton. "So you have some times when the markets feel that there's one cryptocurrency or another, there's people buying it, that tends to raise the price." Hutton adds when interest rates go up, a lot of people are getting out of those trades, leading to the collapse of prices right now.
If you want to get in on cryptocurrency investing, Hutton says the best thing to do is only invest what you can afford to lose. "If that's a few percent of your total assets, that's probably where it should be at. Should you be using Bitcoin or other cryptocurrencies for saving for a house? No. Should you be using it saving for retirement? No," explains Hutton, again because of the volatility. He also says there is not a lot of understanding about which of these are the best products. "We tend to think about some of the the most popular like Bitcoin, but there's a theory. There are a few of these that we've heard of, but there are really thousands of different cryptocurrencies right now," and Hutton says that makes things difficult.
Hutton recommends opening an account with an established provider, like Coinbase, that is a credible vendor of cryptocurrency. "Go slow into this and really learn the differences between the cryptocurrencies," advises Hutton. He also warns there's still a lot of fraud in terms of cryptocurrency transactions to be wary of.
1 Bitcoin is worth $30,000.