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Do cryptocurrencies put your money at risk?
©Dave Ramsey
The price of Bitcoin has soared this year. The digital currency is up more than “130% year-over-year, as of April 11,” USA Today reported, and recently “reached its all-time high of $73,835.57 on March 14.” This drastic jump is partly due to the regulatory approval of Bitcoin exchange-traded funds.
“Investors are becoming interested in the fact that Bitcoin can be treated as an uncorrelated asset, which makes it extremely attractive for portfolio diversification,” Joel Kruger, a market strategist at LMAX Group. he explained to CBS MoneyWatch.
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However, not everyone is on board with the crypto frenzy. Dave Ramsey, personal finance expert, bestselling author, and founder of Ramsey Solutions, a company that educates and provides financial advice, warns against investing in digital currency. In an article posted on the Ramsey Solutions website, the company highly recommends Don’t get involved with cryptocurrencies.
Too risky
Ramsey is clear about avoiding cryptocurrencies and not being tempted by rumors. “Cryptocurrencies are not a safe investment. You could lose your shirt (and pants) playing cryptocurrencies. Stay away…Cryptocurrencies are a risky business,” according to the article.
The article acknowledged that people have made money by investing in digital currency, but with high odds. “Yes, some people have made a lot of money investing in cryptocurrencies, but it’s all based on speculation, which is just one step above gambling,” she said.
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Cryptocurrencies are volatile
Another reason Ramsey doesn’t encourage investing in cryptocurrencies is that they are volatile. “The value of cryptocurrencies rises only to fall again, and you never really know what you’ll get each day,” the article explains. “Someone sneezes and the price drops! And unlike stocks that rise and fall based on a company’s performance, cryptocurrencies go up and down based solely on speculation.
Unproven rate of return
The article compared cryptocurrency investing to the Wild West, stating: “You can’t understand changes or calculate returns like you can with growth stock mutual funds. There simply isn’t enough data, or enough credibility, to create a long-term investment plan based on cryptocurrency.”
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Nobody really knows about cryptocurrencies
The article also highlighted that cryptocurrencies have a secret backstory. “Crypto lives up to its name in that it is quite cryptic. Think about it: no one even knows who founded Bitcoin! Only a small percentage of people in the world truly understand the blockchain technology on which cryptography is based. And ignorance makes you vulnerable,” he says.
Cryptocurrencies make you more vulnerable to theft
Cyber attacks are an ongoing problem with cryptocurrency. “Hackers stole $400 million in cryptocurrencies in the first three months of 2023,” the article reads. “And what’s really crazy is that security experts celebrated that figure because it’s 70% less than what was stolen in the first three months of 2022.”
Bottom line
Instead of taking a chance on cryptocurrencies, the Ramsey Solutions article suggests investing 15% of your income in growth equity mutual funds, but only if you are debt-free and have an emergency fund of three to six months.
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This article originally appeared on GOBankingRates.com: Dave Ramsey: Do cryptocurrencies put your money at risk?