In the past 12 months, the global financial turmoil has led to the rise of cryptocurrency (especially bitcoin) as more mainstream investment. The price of bitcoin has soared more than 400%, and there is widespread speculation that institutional investors will soon add a lot of cryptocurrency to their portfolios.

Advocates of cryptocurrencies argue that these assets have the same utility as more traditional wealth reserves, such as art, gold or even inflation linked bonds that generate negative returns. It is believed that the scarcity of bitcoin - only 21 million of which can exist - may keep its value relative to traditional currencies threatened by fiscal and monetary policies. Greater institutional and corporate support brings a certain degree of legitimacy, which also enables people to build confidence in the stability of the encryption ecosystem. Visa master and Tesla square are major providers of bitcoin and paycard products, while many other companies are developing products.

However, how do serious investors evaluate the assets without cash flow? Because enough people collectively believe that the assets have value, and the assets have become people's favorite target of speculation, so there is no cash flow in the assets? Take the risk that the price of cryptocurrency may fluctuate significantly over a period of time. Although better reputable exchanges and service providers can better serve the cryptocurrency sector, there are still absurd factors for industry participants, so serious due diligence is needed. Although institutional support has increased, glassnode, a blockchain analyst, estimates that about 2% of all bitcoin holders still control more than 70% of all bitcoin. Such a tight market means that price manipulation is a risk, and investors need to know something about liquidity, especially in a highly speculative environment.

If you want to diversify your portfolio by investing a small amount in bitcoin, there are some benefits. Cryptocurrency is a potential derivative of peripheral alternative assets or currencies. Nevertheless, as investors become more aware of sustainability issues, the resources needed to develop bitcoin blockchain through mining are enormous. Bitcoin miners run powerful computers that solve increasingly complex mathematical equations. If the miners are the first to solve the equation, they will be rewarded with 6.25 bitcoins (270000 dollars). The mining process consumes more energy each year than in many countries. If cryptocurrency were a sovereign state, it would be one of the top 30 energy users in the world. The carbon footprint of bitcoin's impact on the environment depends on the energy used, but since about 60% of the world's electricity is still generated by fossil fuels, its carbon footprint is huge. On the whole, there is a lot of hype, polarization and misinformation around bitcoin. Vested interests are rampant. This type of environment often brings the most serious risk to investors. It's natural to be attracted by the dramatic profits people get from bitcoin. If you don't invest now, you may worry about missing out. Even so, it's not a good idea to invest in money that you can't afford. If you save money for future plans, such as buying a house or retiring, don't take the risk of investing in bitcoin. Before you start, make sure you have enough emergency funding. Buying bitcoin involves a lot of risk. By following these steps, you will have a better chance to protect your investment.

(2021-4-5)