There’s little harm in allocating a small percentage to cryptocurrencies if investors can stick with it. But hanging on may not be easy. While some data suggests that Bitcoin investors have skillfully navigated its gut-wrenching volatility, there’s more evidence showing that the more volatile an investment, the more investors tend to buy high and sell low. And nothing is more volatile than cryptocurrencies, which is all the harder to manage when investors can’t see what lies ahead.
Investors may have more visibility around cryptocurrencies in the years ahead, and perhaps it will shed light on longstanding questions about fiat currencies and commodities. But for now, how much to invest in cryptocurrencies remains a question of faith more than science.
Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.