Bitcoin and You

It’s January 19, 2023, and Jim Cramer is furious. “If you are a believer in crypto, this is your chance to become a non-believer,” he declares on Mad Money, his TV show on CNBC. “It’s a travesty of a mockery of a sham, and it’s manipulated, and I’ve had it, and I want you out.”  

Did we mention cryptocurrencies are controversial? 

In 2017, Bitcoin became a sensation by rising over 2,000% in less than a year. Then Bitcoin’s price dropped abruptly. By November 2018, Bitcoin was down 80% from its high.  

This dramatic boom-and-bust price action continued. At the time of Cramer’s rant, Bitcoin had fallen 77%  from a high of 68,789 in November 2021 to a low of 15,599 in 2022.    

Many financial experts are so exasperated by the wild price swings of Bitcoin and its ilk that they recommend you avoid crypto entirely.  

We disagree. Cryptocurrencies remain intriguing because of the unique problems they aim to solve. 

Before Bitcoin, savvy tech experts bemoaned the limits of fiat currency. Government-controlled money isn’t suited to the digital world, they said. Visionaries longed for a currency that was decentralized, digital, borderless, anonymous, and peer to peer.  

Bitcoin addressed these needs with nerdy elegance. It is not a scam; it’s an innovation, and many of today’s most popular cryptocurrencies are attempts to improve on Bitcoin. 

However, innovation alone does not create a sound investment. Bitcoin’s multiple and severe price declines make it a very, very risky option, and you are urged to limit your high-risk purchases to 10% of your portfolio (technically, assets this risky are speculative rather than investment grade, but that’s a post for another time). 

Additionally, never invest (or speculate) with funds you will need in the next three to five years. You need time to recover from downturns.  Recall Bitcoin plummeted in 2018 and soared three years later.  

Finally, if you live paycheck to paycheck and have credit card debt, do not invest in cryptocurrencies. 

Kristen Jacks is the Founder of Money in Your TwentiesView Kristen Jacks’ bio.