Is Bitcoin's Hype Worth the Risk?

As Bitcoin's value skyrocketed to $74,000 in March, the question of whether it's worth the hype remains. While some see it as a lucrative opportunity, others, mindful of the risk, opt for caution. For millennials with limited funds, the decision to hold or exit is a calculated one, considering the volatile nature of the cryptocurrency market. As I reflect on my modest profit of $20 from Bitcoin, I ponder the allure of potential gains against the dangers of financial loss.Ultimately, the choice to invest in Bitcoin is a personal one, balancing the excitement of high returns with the sobering reality of potential risks.

Is Bitcoin Worth the Hype?

As Bitcoin soared to a record-shattering $74,000 in March, I couldn't help but question the euphoria surrounding it. Months prior, I had wisely cashed out my modest crypto holdings for a meager $20 profit.

For some, the recent rebound in crypto valuations evokes memories of the unbridled optimism that marked the previous decade. They see it as an opportunity to hold or even invest more. However, for others – especially millennials like myself with limited funds – it's an exit strategy we should embrace.

Where to Venture Next?

The path less traveled isn't uncharted but simply more stable: the well-established territory of blue-chip stocks or exchange-traded funds (ETFs), particularly those offering attractive dividend payouts.

In 2020, amidst COVID-19 lockdowns and plummeting equity prices, I opened a self-managed investment account. While it's not a substantial nest egg, it has grown to several thousand dollars.

I'm not an anomaly. According to Investor Economics, Canadians opened over 2.3 million new DIY investment accounts in 2020 – nearly three times the number in 2019.

The Allure of Crypto

Bitcoin ownership also surged, with 13% of Canadians holding it in 2021, up from 5% in previous years, as reported by the Bank of Canada. Crypto mining stocks and ETFs, which Canada adopted before the United States, made it easy to invest in crypto without creating a separate wallet.

It was easy to get swept up in the excitement and the fear of missing out. I diverted my savings into crypto and, like many other emerging DIY investors, faced a steep learning curve. I knew that the massive returns enjoyed by crypto pioneers were long gone, but I still viewed them as interchangeable with high-risk stocks.

A Costly Lesson

However, I allocated too much of my portfolio to crypto. Prices fluctuated rapidly, outpacing news cycles, and I became accustomed to seeing outsized gains. This whetted my appetite for more. After the crypto crash in spring 2022, my portfolio's crypto holdings plummeted. My returns fell below my comfort level.

Watching my portfolio suffer over the past few years has forced me to reevaluate my risk tolerance. For me, it meant redefining crypto's role in my investments. In retrospect, investing similar amounts in carefully selected equities or ETFs would have yielded more modest but still reasonable growth without the risks associated with crypto.

The Decision to Sell

So, when I finally saw my Bitcoin investment turn a profit again, I sold. It was a small gain, but I could reallocate the funds to something more thoughtfully chosen, rather than following the herd.

A defining moment occurred during an investor call for a freelance story I was working on. A Goldman Sachs Wealth Management executive was asked about the new Bitcoin ETFs approved for trading in the United States.

Her response was unequivocal: investors should not allocate to cryptocurrencies or crypto ETFs as part of their investment portfolios. She likened it to gambling in a Las Vegas casino. Suddenly, my perception of crypto allocations as classic investments seemed naive.

A Personal Choice

Of course, this is ultimately a personal decision. Some individuals enjoy speculation and have the financial means to absorb losses. However, many DIY investors, including myself, do not fall into that category. We can't afford to take such risks. I'm not a gambler, and growing my portfolio for a down payment or retirement requires a more prudent approach.

Inspired by the executive's comments, I vowed to accelerate my divestment and reallocate my funds more selectively. When an opportunity arose to sell my Ethereum holdings at a profit, I took it. Same with several crypto mining stocks.

A Sense of Relief

Since making this shift, I feel more confident and secure about my investments, even though my portfolio hasn't grown significantly. I also pay less attention to the constant headlines about crypto. That's why I hardly noticed recent news of Bitcoin selloffs eroding some of its record-breaking gains.

Numerous cautionary tales exist of everyday people losing their savings or selling at a loss out of fear of further decline. If the opportunity arises to break even or make a small profit, seize it.