What you should know about investing in cryptocurrency amid volatility

It’s been a tough time for cryptocurrency, but despite volatility, you still need to know how the technology works, said Douglas Boneparth, a certified financial planner based in New York.

The digital currency market fell by almost $1.4 trillion in 2022, following a cascade of bankruptcies and liquidity problems, including the high-profile collapse of crypto exchange FTX. In March, crypto-focused Silvergate Capital announced plans to wind down operations, and regulators shut down crypto lender Signature Bank.

Although the crypto market rallied in early 2023, assets recently fell again, with bitcoin falling below $20,000 on Friday, triggered by a stock market selloff in the United States. But bitcoin rose by 10% on Monday, following the news that US regulators ‘ plan to protect depositors and financial institutions linked to Silicon Valley Bank.

Boneparth, who is president of Bone Fide Wealth and a member of CNBC’s Financial Advisor Council, said the recent events and volatility in the crypto market have made him even more “bullish” about learning about the technology.

“It’s clear that the decentralized financial world is interconnected with the traditional financial world more now than ever before,” he said.

An early adopter of digital currency since 2013, mostly in bitcoinBoneparth said there is much to learn about the technology we will inevitably see more of in the future.

“This doesn’t necessarily mean you should allocate your money there,” he said. But he believes you should invest time and energy to see where the technology might be heading.

“I’ve learned a lot on my journey without having to take an exorbitant risk,” Boneparth said.

When it comes to cryptocurrency, he said the “best thing you can do” is learn about the technology and how decentralized finance works. “A little bit would go a long way,” he added.

“It’s powerful stuff,” Boneparth said. “It’s not always putting your money into the latest crypto craze; it’s learning what it’s all about.”

While many advisers won’t recommend clients buy or sell digital currency, Boneparth said investors can come to his practice for guidance on existing crypto allocations.

“Some people have accumulated quite a lot of money in cryptocurrency,” he said. “And it’s my job to show them what the risk is, how that concentration and that asset can affect their long-term goals and their portfolio.”

Boneparth said it’s important to know how owning a certain type of asset can affect your financial goals, especially “volatile assets” like cryptocurrency.