KUALA LUMPUR: The turbo-charged rally of the world's most well-known cryptocurrency, Bitcoin, has led analysts to caution investors looking to get on to the bandwagon to be aware of the pitfalls with investing in the virtual currency.
Donal Trump's US presidential victory has backed a europhia fuelled rally of Bitcoin to reach an all-time high of US$93,480 on Wednesday.
During his campaign, Trump showed signals that his government would be crypto friendly.
His campaign accepted donations in cryptocurrency and he also made appearances in industry events, further solidifying his pro-crypto stance.
The president-elect also promised to make the US the "crypto capital of the planet" and to create a national bitcoin reserve.
"Trump is known to have a pro-crypto and pro-business stance, which is why crypto-friendly stocks have also been seeing strong rallies even before he was officially announced as the president-elect."While this may appear to be positive news to investors, we still have no certainty about the Trump administration's policies and how they would impact local and global markets," Luno Malaysia country manager Scarlett Chai told Business Times.
A rise in Bitcoin prices also lifted other cryptocurrencies as well.
Ethereum has been trending upwards along with Solana, Tether and BNB. Other popular cryptocurrencies include Ripple, Tron, USD Coin and Dogecoin. An industry expert noted that at the rate Bitcoin is trading now, it is highly likely for the digital currency to reach US$100,000 next year.
"It is still within the upward cycle and 2025 will be a more realistic target for Bitcoin to reach US$100,000," said the analyst who commented on condition of anonymity.
He also added that Ethereum is a top pick amid the current price rally.
Understanding the risk and rewards of cryptocurrencies
Chai said that cryptocurrencies should be treated like every other investment asset class, taking into full consideration the risks versus rewards.
Despite the rise in Bitcoin prices and other crypto currencies seen recently, it is pivotal for investors to do their research before jumping on the bandwagon.
Chai said a thorough research helps investors understand cryptocurrency, the token's utility, the team behind it, and the community backing it, as all these factors can contribute to the cryptocurrency's price action.
"Cryptocurrencies like Bitcoin and other top market-cap coins are proving they are becoming an alternative asset class from mainstream equities, bonds, and real estate.
"Similarly to every investment advice out there, never put all your eggs in one basket, which applies to cryptocurrency, too. Some financial advisors have shown that adding five per cent in Bitcoin over five years in a traditional equity-bond portfolio outperforms just purely an equity-bond portfolio.
"That said, past performance is not a guarantee of future growth. And specific allocations of an investment portfolio to alternative assets will differ from person to person," she said.
Chai added that investors should also stay away from unlicensed investment schemes.
Many have fallen victim to these schemes in the past.
"A licensed digital asset exchange will never promise returns, as all investments come with risks," Chai said.
She added that investors should have a strategic approach to investing, keeping in mind that the market can correct at any time.
"Being informed of the latest market developments is especially crucial before making a financial decision like investing. Industry and regulatory news can drastically impact the value of cryptocurrency because markets can shift based on macroeconomic trends and regulatory changes,"" she said.
"For example, "Luno Discover is a portal that helps investors be informed about the recent industry happenings. It is freely accessible and contains information suitable for all ages, regardless of their maturity in cryptocurrency," said Chai. -end