With Bitcoin currently tracking at around $114,000, as of Aug. 6, and having gained approximately 22% in value year-to-date, there’s little doubt that crypto-savvy investors consider it a mainstay of any diversified portfolio.
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That’s perhaps why, in mid-June, investing reporter Christine Ji — formerly of Business Insider, now reporting to MarketWatch — detailed her foray into Bitcoin investing, outlining mixed results and why it’s important to be careful as to how you trade the up-and-coming crypto.
First, Avoid FOMO
The first lament shared by Ji is the simple fact that she bought into Bitcoin for the wrong reasons.
“In hindsight, I realize I committed the classic retail investor impulse: Buying in because of FOMO. Sure, positive investor sentiment led to gains in bitcoin, as well as the ETF I bought that was designed to track the crypto. But my stock purchase proved ill-timed,” she wrote.
To clarify matters, Ji invested in two shares tied to BTC — Blackrock’s iShare’s Bitcoin Trust ETF (IBIT), and Semler Scientific (SMLR). The latter, a healthcare tech company, merely holds Bitcoin on its balance sheet as a hedge, while Blackrock’s BTC ETF is tied to the crypto more closely by design.
While IBIT performed very well (outperforming even BTC itself as a pure investment, at least by the time Ji had filed her initial report), the same couldn’t be said for Semler, which actually shed value post-investment. FOMO, as advertised, can lead to hasty decisions rather than considered investments.
It’s your money, be sure to avoid FOMO-based decision-making.
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Focus on Bitcoin ETFs (or Bitcoin Itself), Rather Than Companies Holding BTC Reserves
Tied to the above reasoning, Ji advised staying away from picking single stocks heavily advertising a balance sheet containing Bitcoin reserves. While this may be attractive to those unfamiliar with cryptocurrency, or who are following headlines seeing BTC soar, there are a multitude of other factors playing into each stock’s valuation.
“My takeaway from the experience is that buying a single stocks as a Bitcoin proxy is probably not a good idea,” Ji began. “When you buy into a Bitcoin treasury company, you’re also inheriting all of its company-specific risks. That includes everything from management decisions and financial health to legal exposure, product performance, and market sentiment around the core business.”
Instead, opening an account with a reputable investment platform allowing for trading of crypto — Kraken, Coinbase, etc. — and either buying Bitcoin itself, or buying into established Bitcoin ETFs, makes more sense, according to Ji.
The Results Speak for Themselves
While, at the time of publishing, Ji noted that IBIT had outperformed BTC (14% gain versus 12%, respectively), and Semler had lost more than 40%, things have shifted slightly in the interim.
As of early August, IBIT was still performing well — up 16.6%, to $64.55 per share — and Semler was still sluggish (down 36.1%, to $34.87 per share).
However, Bitcoin gained 21.9%, outperforming both stock options.
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This article originally appeared on GOBankingRates.com: Expert Warns How You Invest in Bitcoin Can Drastically Alter Results — 2 Reasons To Tread Lightly
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
