Tesla CEO Elon Musk recently made headlines after announcing that his company bought $1.5 billion worth of Bitcoin (CRYPTO:BTC).
The cryptocurrency has been around for years, but it has surged more than 370% over the past 12 months. Even before Tesla’s investment in Bitcoin, Musk himself has been credited with increasing the price of cryptocurrencies by voicing his support online.
Because of its soaring price, Bitcoin may seem like an attractive investment. But is it the right time to buy?
Weighing risk and reward
When you’re considering any investment, it’s crucial to look past the dollar signs and consider the risk involved.
Bitcoin is an incredibly volatile investment, so it’s not for the faint of heart. While it has seen an impressive upward trend over the past several months, nobody knows how long that will last. The cryptocurrency has experienced wild price fluctuations in the past, sometimes losing up to 80% of its value.
Between 2017 and 2019, for instance, Bitcoin jumped from around $1,000 to more than $17,000, before it plummeted back to around $3,000.
While all investments are subject to short-term volatility, Bitcoin has experienced extreme levels of turbulence.
In addition, it’s unclear whether Bitcoin really is as game changing as its proponents claim. Some supporters believe the cryptocurrency will become the future of global transactions. Right