Cryptocurrency has been the hottest topic among investment circles recently. Many investors are being captivated by the thrill of a huge payday, but the last weeks proved that the bearish and bullish cycles can change in an instant.
There has been a lot of speculation on why Bitcoin and Ethereum dropped so suddenly. Here are the three major catalysts:
1. Chinese vice-premier Liu Hu saying China will “crack down on bitcoin mining and trading.” Liu believes any digital currency is not real and poses a financial risk.
2. Tesla’s Elon Musk suspended bitcoin as a form of payment on its cars. This isn’t the first-time bitcoin has been at the mercy of Musk.
3. Some financial analysts are saying US inflation is another cause of the dip.
Why opt for high volatility and risk like with cryptocurrency? Conventional wisdom constantly pushes investors to balance and diversify during times like now. In the past, diversifying meant you followed the risk parity portfolio approach. Asset allocation is the process by which an investor divides the capital in a portfolio among different types of assets. The traditional portfolio allocation is 60% to equities and 40% to bonds. In this landscape of volatility and low-interest rates that don’t even keep pace with inflation, staying the same course may not be the best option for these especially turbulent times.
This is the challenge of investing in the market today. Technology innovations are hitting the market faster with new risk definitions changing by the minute. There is no such thing as a passive investor anymore.
Savvy investors and institutions are constantly hedging their portfolios against these downsides with a broad range of alternative investment opportunities. Combining alternative investments with low correlation to the stock market and your current investments will truly diversify your portfolio while reducing your risk associated with market volatility.
About Family Business Fund
The Family Business Fund (FBF) was founded in 2018 to help ensure that small businesses have access to the resources needed to thrive. FBF is an SEC Reg. D., 506C, high-yield, fixed-income fund for accredited investors.
For more information about how you can invest in the Family Business Fund, contact Douglas Muir at douglas@familybusinessfund.com or call (888) 884-6442 ext. 3.
