Dogecoin explodes. Invest with caution
The newest cryptocurrency star is a coin named after a meme from a Shiba Inu dog that started out as a joke.
According to Coin Metrics, the price of Dogecoin rose around 40% on Tuesday. The coin also reached a market capitalization of $ 69 billion, making it the fourth largest cryptocurrency behind Bitcoin, Ethereum and Binance coins.
The run is the final leg of an epic rift in which the value of the cryptocurrency has risen by more than 600% in just a few weeks and by more than 11,000% since the beginning of the year. The coin is currently worth around 55 cents, a record high.
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Some things have taken into account the price movement, including high profile support and an internet follow-up from retail investors aiming to get the price of the coin up to $ 1.
In late April, Tesla CEO Elon Musk tweeted “The Dogefather SNL, May 8,” referring to both the coin and his upcoming appearance as the host of “Saturday Night Live.” Musk has said that his tweets about Dogecoin are supposed to be jokes.
At the same time, Mark Cuban, owner of the Dallas Mavericks basketball team, held several positions in support of Dogecoin.
“As long as more companies are using Doge for products / services, Doge can be a viable currency as it may hold its purchase value better than a dollar in your bank,” Cuban said in a May 2 tweet. “If interest rates soar, or the amount spent goes down or stagnates, so will Doge. Yes, a joke is now legitimate.”
Even during the record rally, experts warn investors not to jump into Dogecoin just to make money. Cryptocurrencies are very volatile, which means that the current streak can reverse at any time.
Invest only what you are ready to lose
Financial experts generally advise that people who want to invest in cryptocurrencies only allocate a small part of their portfolio. The UK’s Financial Conduct Authority has issued a similar warning.
“Never invest anything you don’t want to lose,” said Ben Weiss, co-founder and CEO of CoinFlip, one of the largest Bitcoin ATM companies in the US
“If you like Dogecoin and think it could be a viable currency in the future, or are fans of the idea and the movement, invest in it,” he said. “If you don’t like it or you think it’s a fad, don’t invest in it.”
Never invest anything that you don’t want to lose.
CoinFlip CEO and Co-Founder
He also warned first-time cryptocurrency buyers not to dive straight into Dogecoin without investing in other coins. Bitcoin has a 10 year track record at this point, which makes it a different risk than investing in a newer alternative coin.
And investors shouldn’t bet on Dogecoin to make a profit in a short period of time.
“If any part of your brain is failing, this is a great way to make money fast. Then you should think twice,” he said.
Buy long term
Of course, Weiss supports investing in cryptocurrencies and Dogecoin and recommends all investors to hold some digital coins, even if this is only a small part of the portfolio.
“You never want to miss out entirely,” he said. “They’re always stepping up for the things you don’t do and the opportunities you miss out on.”
Anyone looking to invest in a variety of digital coins should assess where they stand with other personal financial and investment goals to determine if they have additional money to invest in a risky asset.
If you do, it’s okay to put some money in bitcoin and buy it on a day it doesn’t work, said Anjali Jariwala, certified financial planner and CPA and founder of Fit Advisors in Torrance, California.
“Throw in some money and somehow let it stay in there and flavor it for a while,” she said. “Just so you don’t have to make decisions every time there are price fluctuations that happen every few days at that point.”
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
Disclosure: “Saturday Night Live” is a television show hosted by NBCUniversal, the parent company of CNBC.
Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank,” in which Mark Cuban is a panelist.