An investment officer discusses the psychological aspects of Bitcoin investing
The first week of 2022 concluded on a rather depressing note, with Bitcoin falling below $43,000. Even at press time, there was no joyful message from El Salvador’s President asking citizens to purchase the dip.
Even modest Bitcoin investors, understandably, may be feeling gloomy right now, as the king currency continues its slide into the red. To that end, Peter McCormack of What Bitcoin Did chatted with investment officer Cullen Roche about his thoughts on the flagship currency — and his advise for investors.
Roche swiftly stated that he was concerned about an investor’s “hyper-exposure” to a single asset. He emphasised how even brief price reductions might be traumatising and said,
“I believe that the majority of individuals do not need that level of danger. However, you can design a truly diversified portfolio that includes assets such as Bitcoin and other highly volatile assets without overexposing you to the level of volatility.”
McCormack acknowledged that he may be overexposed to Bitcoin. Additionally, the podcast host said that he came perilously close to losing his house.
Roche, for his part, cautioned viewers that a decline in stock values might be attributed to factors such as job loss, collapsing portfolios, and related family difficulties. He disputed, though, that he was a Bitcoin critic, instead emphasising prudence.
In terms of investor psychology, Roche predicted that few would be able to witness their portfolio depreciate much before reducing their losses. He clarified,
“The majority of individuals would be unable to tolerate a 50% decline in their entire financial holdings over a three- to five-year timeframe. They’d eventually reach a point in there when they’d say, ‘This isn’t worth it.’
Roche said that this may be dramatic if the item in question was one in which investors had a lot of faith – such as Bitcoin.
In the autumn of 2021, former Twitter CEO Jack Dorsey’s remark on hyperinflation surely sparked concern that hyperinflation may also strike the United States.
Investors, on the other hand, may be glad to find that Roche disagreed. The investment executive described the forecast as a “poor showing” and said that he believed the likelihood of hyperinflation in the United States was “astronomically low.”
Adding to that, Roche said unequivocally that he did not believe Americans will be compelled to utilise Bitcoin as an inflation hedge in the near future.