Fool’s Bitcoin

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What's going on?

Bitcoin’s suddenly looking a bit less convincing: the cryptocurrency dropped 10% late last week, even after having hit new highs a few days before.

What does this mean?

Bitcoin’s been on a tear this year: its price has risen 130% versus the US stock market’s 14%, and just last Wednesday it hit the $19,600 mark – its highest since December 2017. That might be because mainstream investors seem to be coming around to digital currencies: PayPal announced last month it’d let its users buy and sell cryptocurrencies using their PayPal accounts, and last week a bitcoin exchange-traded note – an easy way for stock and bond market investors to buy into crypto – launched in Germany.

But not long after bitcoin peaked, its price fell by the biggest amount in a single day since March. And that could be because investors wanted to lock in their profits: analysis by crypto firm Intotheblock showed several big traders effectively moving their coins onto exchanges – suggesting they were gearing up to sell.

Why should I care?

The bigger picture: Profits don’t come easy.

Investors might be worried that 2017 – when bitcoin’s price skyrocketed, only to collapse shortly after – is happening all over again. This time around, though, crypto enthusiasts could argue that bitcoin’s reputation as a “safe haven” in volatile times makes its price more sustainable. Kansas City Federal Reserve probably disagrees: the reserve bank concluded in April that bitcoin behaves exactly like a risky asset – which means investors are essentially betting on supply and demand to work in their favor (tweet this).

For you personally: Always use protection.

When you own a cryptocurrency, what you actually own is a private key that lets you make transactions from a given “address”. That means keeping your key out of hackers’ grubby little hands is your number one priority. It can be expensive, though, so be sure to account for the additional cost if you’re thinking of taking the plunge.

Originally posted as part of the Finimize daily email.

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