NBCNews -Bitcoin’s value soared to new heights this week, extending a post-election surge as President-elect Donald Trump vows to boost cryptocurrencies.
Wealth advisers and personal finance experts say they’re hearing from more people taking a fresh look at the market, but their advice remains: Dip a toe in, don’t dive headfirst.
“My POV on the risks and benefits of bitcoin hasn’t changed much, if at all,” said Samuel Deane, president and CEO of Deane Wealth Management, a financial advisory firm.
“Though the incoming administration is pro-crypto right now, I’ve seen enough in politics to know that can change at any time.”
The price of bitcoin traded north of $100,000 late last week after clearing the six-figure threshold for the first time Wednesday, as investors bet on the next administration resetting the rules for an industry that has drawn scrutiny from regulators.
Trump, who swiftly took credit for the bitcoin milestone, named billionaire investor David Sacks a White House “crypto czar” and tapped crypto advocate Paul Atkins to lead the Securities and Exchange Commission. The president-elect wrote on his social media app that Atkins “recognizes that digital assets & other innovations are crucial to Making America Greater than Ever Before.”
But for ordinary investors, the same old tenets apply, Deane said. While he’s a long-term bitcoin investor himself, clients who’ve added crypto to their portfolios are “doing it on their own after we establish the proper guardrails,” he said.
“First understand the basics of bitcoin as a decentralized digital currency,” he advised, which includes taking stock of its volatility. The token was trading at around $43,000 back in January and hovered around $70,000 days before the election — but around this time two years ago, it cost just $17,000.
“This is something that’s been going on forever as it relates to the cryptoverse,” said Lee Baker, founder and president at Claris Financial Advisors. “You get these quick run-ups, but then you get some very sharp pullbacks.
The thing you have to caution clients and other investors is that, ‘Hey, listen, you’ve got to be real careful to do this stuff in small doses.’”
Baker said his firm has received “multiple queries” from clients looking to learn about bitcoin as it surged following Trump’s win, but he’s heard more interest lately in other coins such as XRP, the cryptocurrency of the Ripple blockchain network, as well.
He said he advises first-time crypto investors not to allocate more than 2% of their portfolios to bitcoin.
Bitcoin-based exchange-traded funds can help limit direct risk and are often a good place to start, Baker said. These options are new, but there are already plenty of popular ones to choose from, such as the Grayscale Bitcoin Trust, which launched last year after the company won a lawsuit against the SEC that helped open the door to bitcoin ETFs.
Some of those investment products have exploded since Trump’s re-election.
Yet, Federal Reserve Chairman Jerome Powell spoke skeptically of bitcoin this week, saying that it’s still widely treated “as a speculative asset.”
