Volatility matters. On that topic, I thought it might be a good illustration to talk about the movement in bitcoin over the course of the last month or two. It’s gone from over $60,000 to $30,000 in about a month. There’s much speculation as to the reasons, but it’s hard to say why the movement has been so severe. CNBC in a recent article outlined bitcoin‘s recent price movements.
“Bitcoin accelerated its slide to fall below the $32,000 level late Tuesday morning. The world's largest cryptocurrency then recovered slightly, trading 9% lower at $32,854.99 as of 4:01 p.m. ET.
Smaller digital coins also slumped, with ether falling about 8% to $2,499.28 and XRP tanking over 7%.
In April, 2021 was looking to be a banner year for digital assets, with bitcoin having topped $60,000 for the first time ever. But a recent plunge in crypto prices has shaken confidence in the market. Bitcoin sank to nearly $30,000 last month, and is currently down roughly 50% from its all-time high.
The digital currency is now up only about 12% since the start of the year, though it's still more than tripled in price from a year ago.”
Volatility and fluctuation are an important consideration when you are developing an investment strategy. We ask people on a regular basis to truly examine how they might feel if their portfolio or certain assets experienced significant fluctuation. While everyone says they can endure volatility when markets are rising, the answer tends to be a little different when losses tumble in. Understanding how you react based on volatility and fluctuation is an important consideration.
The bitcoin example is one dramatic illustration of what fluctuation can look like. But all assets (stocks bonds and commodities), can and do fluctuate. Understanding your ability to withstand swings in the market from an emotional standpoint is imperative. This is something to keep in mind as we move forward in the second half of 2021.
We will continue to make adjustments as needed. We’ve already taken proactive steps in the first and second quarter of this year to move in the direction that we think makes sense given come in headlines. We will continue to watch and adjust.