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In the last few weeks, bitcoin has been on a wild ride, surging to record highs and then wiping hundreds of billions of dollars from the cryptocurrency market days later.
The volatility shows why curious investors should pause before putting money into the cryptocurrency.
Bitcoin had an epic runup early in 2021. The asset hit a record high of $41,973 on Jan. 12, according to data from Coin Metrics, but just days later fell about 15%, wiping as much as $200 billion from the cryptocurrency market in just 24 hours.
The next week, it regained some of its losses, surging to near $40,000 before reversing course yet again. On Thursday, the cryptocurrency slipped about 8%, bringing the asset’s two-day losses to more than 10%. In addition, the price of bitcoin fell below $32,000 for the first time since Jan. 11.
The slump wiped another $100 billion from the total cryptocurrency market in 48 hours.
The extreme movements up and down are relatively common for bitcoin and are expected to continue.
“The only thing I can expect for sure is volatility,” said David Yermack, a professor of finance at New York University Stern School of Business. “From day one, this has been a risky investment for people.”