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I have no idea how investors in cryptocurrencies manage to get any sleep at night. It doesn’t matter which “coin” you’re investing in; if a substantial amount of your portfolio is devoted to crypto, despite recent warnings from pundits like Warren Buffett, you’re in for a stomach-churning roller-coaster ride. But hats off to you; you’ve probably got guts.
Unfortunately, having such a sky-high risk tolerance and an affinity for speculative stocks is not an attractive attribute for long-term investors. What you’re really doing is gambling, but unlike putting your coins in a slot machine and pulling the lever, you’re choosing to let your money ride a wave that never sleeps.
Not to scare you, but cryptocurrencies trade at all hours of the day, and there’s a possibility that your crypto holdings may stand to lose a huge chunk of their value while you sleep. The thought of not knowing what’s going on with Bitcoin at every waking moment is enough to make anybody sick to their stomach.
The crypto craze is very compelling. Many Bitcoin millionaires have been made, including Peter Thiel and his Founders Fund, which was reportedly a big winner from the crypto mania. But just because smart money made a great deal doesn’t mean you should expose yourself, especially since you’re likely locking in a cost basis that’s substantially higher than that of Peter Thiel’s fund. You’re entering near the top, while a majority of Thiel’s investments were near the bottom. It just doesn’t make sense for you, since it’s way too late in the game.
Warren Buffett, the smartest investor of our generation, recently shed light on his views of Bitcoin and crypto, and if I were a crypto investor, I’d be scared out of my wits. Buffett would probably bet on a five-year put on crypto, and, rest assured, he nor Berkshire Hathaway Inc. are touching anything crypto with a barge pole. And that includes crypto miners like HIVE Blockchain Technologies Inc. (TSXV:HIVE), an alternative instrument for Canadian investors to cash in on the “blockchain” hype.
I have no reason why crypto investors would still be in the game at these levels after experiencing negative momentum and reading headlines from experts who think crypto will be a bubble that will burst at some time in the near future.
If you’re still in the crypto game, and you’re planning on jumping out, you should probably do so before the herd heads to the exits, because by then you may find your crypto assets may not be as liquid as you thought.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of Berkshire Hathaway (B shares).