Thanks in part to Tesla CEO Elon Musk who recently announced that his company bought $1.5 billion worth of Bitcoin, the cryptocurrency has surged by over 370 percent over the past 12 months, writes Katie Brockman for The Motley Fool.
While that makes it seem like an attractive investment, it is necessary to also look at the risk involved before determining if this is the right time to buy.
Bitcoin is a markedly volatile investment. While it recorded impressive growth in recent months, nobody knows how long this trend will continue. Throughout its history, the cryptocurrency has experienced huge price fluctuations, at times losing up to 80 percent of its value.
Also, the currency is still only accepted by about 2,300 U.S. businesses as a form of payment, and if its use does not become more widespread it will be tough for it to survive.
These factors make Bitcoin a risky investment that is not the best fit for most people. Still, those who are eager to invest in the cryptocurrency have to ensure they are doing it safely.
A well-diversified portfolio is a must. If you invest all your money into Bitcoin, you could suffer devastating losses due to its huge swings in value.
It is also important to only invest what you can afford to lose. You may not lose money by investing in the popular cryptocurrency, but it is a good idea to prepare for the possibility.
Read more about Bitcoin at The Motley Fool by clicking here.