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Bitcoin's price just hit a new all-time high — at over $66,000.
The cryptocurrency's popularity has exploded. Many everyday investors who were previously unfamiliar with crypto are now trading bitcoin like they do stocks and bonds. Buying bitcoin is as easy as a few clicks on Cash App or Venmo. Just this week, bitcoin enthusiasts got the closest thing so far to a bitcoin exchange-traded fund (ETF) or mutual fund when the first bitcoin futures ETF came to the U.S. market.
Bitcoin's previous record high was just below $65,000 per coin in mid-April. Soon after that, however, bitcoin prices plunged, dropping over 50% by July due to several factors including news from Tesla and the Chinese government. The digital currency's price then soared to a new high of more than $66,000 as of Tuesday morning.
But just because bitcoin's price hit another record doesn't mean it's a good time to get in on the action. Just take a look at the previous spikes that resulted in record highs, and what happened afterwards.
Bitcoin record high: What happened after previous price surges?
Crypto investors are no stranger to volatility — especially volatility after a record high.
Bitcoin may have skyrocketed to a peak in April, but the price certainly didn't stay there.
The next month, Tesla reversed its decision to accept Bitcoin as payment, then the Chinese government said that the country's financial institutions and payment companies wouldn't be allowed to provide services related to cryptocurrency transactions. Bitcoin's price nosedived to as low as $30,000 per coin in May, wiping out over 50% of its gains.
The whiplash was likely familiar to those who owned bitcoin in 2017. In December of that year, Bitcoin hit a high of $20,000 before crashing to around $12,000 before the new year even began. The crypto had a tough 2018, sinking below $5,000 per coin in December 2018.
Will bitcoin crash again?
There's no way to predict the future. Some of the investors who predicted the 2008 housing crash say bitcoin is a bubble that will burst. The Bank of England's deputy governor for financial stability said bitcoin's price falling to zero is "a plausible scenario." Meanwhile, Fidelity's director of global macro Jurrien Timmer tweeted that bitcoin's price could hit $100,000 by 2023.
While there's no crystal ball for the crypto market, you can bet that an asset as speculative and volatile as bitcoin has not seen the end of its price rollercoasters. (And cryptocurrencies are now more tethered to the broader financial system than they were in 2018.)
That doesn't mean to sell all your bitcoin, but it is a reminder that crypto isn't for those who can't stomach both the epic price rises and the scary plummets. Financial advisors recommend allocating just a small part of your portfolio — no more than 5% — to risky assets like crypto, and to ignore the massive volatility and invest for the long term.
“If you’re committed to crypto in your portfolio, then treat it the same way you would treat a long-term investment, don’t treat it as a fad investment,” Anjali Jariwala, certified financial planner and founder of FIT Advisors previously told Money.
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