Recently, bitcoin crossed a major milestone: $100,000. This event caused me to take a walk down memory lane. The first bitcoin story that I covered for CBS News was in 2013, when it rose above $1,000…from $13 at the beginning of the year!
Back then, people like me were warning that crypto, which was largely unregulated, could be used for criminal enterprises, and therefore should be avoided.
That continued for a few years — in 2017, JP Morgan Chase CEO Jamie Dimon said investor euphoria over bitcoin was “worse than tulip bulbs. It won’t end well. Someone is going to get killed… it will blow up.” (For the uninitiated in manias, in 1636 Dutch society went nuts over tulips, driving the price sky-high, before crashing to earth in 1637.) Dimon was sort of right, in that bitcoin has been a wild, volatile ride.
But believers hung on and were rewarded when the Chicago Mercantile Exchange launched bitcoin futures at the end of 2017, opening the door to new investors.
There were fits and starts but as the pandemic trading frenzy advanced, bitcoin peaked at $69,000 in 2021. It subsequently bottomed out at $16,000, after Sam Bankman-Fried’s felonious crypto exchange FTX was eviscerated in November 2022.
Now two years later, there has been widespread adoption of crypto by even the stodgiest of investment companies, helped by the easy access that various financial products provide to individual investors.
As all financial assets were rising in 2023 and again this year, more money was thrown into risky assets like crypto. The presidential campaign further elevated excitement, as Republican candidate Donald Trump proclaimed that he would be the first “crypto president.”
True to his word, the President-elect’s choices to lead the Treasury Department (Scott Bessent) and the Securities and Exchange Commission (Paul Atkins) are crypto fans. Their nominations are a clear sign that the administration will reduce crypto regulation, a big turnaround from the Biden administration, which aggressively pursued crypto wrong doers.
Given the state of the crypto market generally and the rise of bitcoin in particular, here are the answers to some of the questions you have recently posed to me.
Is it too late to buy crypto?
I am not a market timer, but before you make a risky bet on any individual investment idea, you need to address your Big 3:
(1) Establish an emergency reserve fund of 6-12 months of living expenses.
(2) Pay down high interest consumer student debt.
(3) Max out your retirement account. If you have the Big 3 covered, know that any crypto investment will be volatile, so keep the amount invested to under 5 percent of your total investments.
How should I invest in crypto?
The most straightforward way is to directly purchase the coins you’re interested in through a crypto exchange. But direct investments in crypto are not insured by the FDIC or the Securities Investor Protection Corporation, so if the platform goes broke there is no protection except the bankruptcy courts.
For the vast majority of people, buying an exchange traded product or an exchange traded fund through most trading or investment platforms is probably the easiest way to invest.
Earlier this year, the SEC approved the trading of ETFs that invest directly in bitcoin, giving investors a simple way to make their bets. You can also buy stock in companies that invest in crypto or provide services to the industry.
What about other, non-bitcoin crypto investments?
This is an industry that has been rife with scams and scandals, so if you are going to take the plunge, pick one of the larger assets, like bitcoin, ETH, Tether, or XRP.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.