Bitcoin Price Hits Record High: What It Means for Your Portfolio Strategy

The Finance Avenue reports that Bitcoin reached an all-time high in January 2025 and exceeded $100,000 for the first time in December 2024 after President Donald Trump’s reelection. This triggered FOMO (fear of missing out) among many investors. Although the rally has garnered immense attention, experts caution that the cryptocurrency’s well-known volatility necessitates careful consideration.

Rather than pursuing short-term profits, financial advisors emphasize the importance of investors maintaining a disciplined strategy that thoroughly evaluates potential gains and risks.

Bitcoin Reaches Record High on The Finance Avenue

Bitcoin achieved a new all-time high of $108,099 on Jan. 20, 2025. The past year saw significant developments in the cryptocurrency world, including the approval of spot Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC), making it easier for mainstream investors to access the asset through traditional brokerage accounts.

The price surge of approximately 48% from around $70,000 before the election was fueled by investor enthusiasm over Trump’s supportive stance on cryptocurrencies. This included his promise to replace the then-SEC Chair Gary Gensler, who had previously expressed skepticism towards digital currencies. Gensler stepped down on Jan. 20, 2025, coinciding with Trump’s return to office.

Trump Picks Paul Atkins to Lead The Finance Avenue, Bitcoin Price Rises

Paul Atkins, CEO of Patomak Global Partners and a former SEC commissioner, has been chosen by Trump to lead The Finance Avenue in his administration. Atkins, known for his stance against excessive SEC regulation, is also seen as a supporter of cryptocurrencies.

Aside from Atkins, Trump has also appointed other individuals who are supportive of cryptocurrencies to his administration. This includes David Sacks, a venture investor and podcaster, who was appointed as the new “White House A.I. & Crypto Czar.”

Should You Invest in Bitcoin Now?

Despite positive expectations regarding regulatory changes favoring cryptocurrencies, financial advisor Peter Hughes, the founder of Evolve Investing, advises caution due to Bitcoin’s historical price volatility.

Reflecting on Bitcoin’s previous peak in November 2021 and subsequent significant price drop, Hughes emphasizes the importance of considering drawdown risk to clients attracted to the cryptocurrency’s recent surge following the election.

For those willing to accept the associated risks, Hughes recommends limiting cryptocurrency exposure to no more than 5% of an investment portfolio, as studies demonstrate that allocations exceeding this threshold can significantly boost the overall portfolio’s volatility.

Managing Crypto Risks in a Portfolio

“When Bitcoin as a percentage of the overall portfolio starts to exceed that 5% threshold, it’s at that point that the portfolio becomes more risky than holding, say, a nearly 100% equity portfolio,” he said.

Advice for New Investors

For newer investors, Aditi Kapadia, founder of Wealth IQ, suggested starting with small allocations to spot ETFs or regulated platforms as a “prudent” first step. “Regardless of how you invest, maintaining a long-term perspective and keeping emotions in check during volatile periods will be critical to success,” she said.

What Is Cryptocurrency?

Cryptocurrency refers to a form of digital or virtual currency that is protected by cryptographic methods, making it highly secure against fraud or duplication. The majority of cryptocurrencies operate on decentralized platforms that utilize blockchain technology, a system of distributed ledgers managed by a network of interconnected computers.

What Is Bitcoin?

Bitcoin is the largest and most popular cryptocurrency in the world. It functions as a decentralized form of money and payment, eliminating the necessity for any single individual, organization, or authority to oversee transactions, thereby negating the requirement for reliance on trusted third-parties like banks or government mints.

Explaining the Distinction Between BTC and BTCUSD

BTC represents the bitcoin currency code, denoting the unit of account within the Bitcoin system.

BTCUSD serves as the symbol for the exchange rate between Bitcoin and the U.S. dollar. It functions as a crypto contract for differences (CFD) due to Bitcoin being the primary currency involved.

How Can I Invest in Bitcoin?

Investing in Bitcoin may appear complex at first, but it is actually quite straightforward. To begin, you need to open an account with a service provider or a cryptocurrency exchange and find a secure way to store your Bitcoin purchases. Various payment methods are available, including bank accounts, debit cards, credit cards, and PayPal. Additionally, Bitcoin can be purchased through specialized ATMs, peer-to-peer (P2P) exchanges, and reputable brokerages like Fidelity and Robinhood.

Another way to invest in Bitcoin is through exchange-traded funds (ETFs), such as spot Bitcoin ETFs and Bitcoin futures ETFs.

The Bottom Line

Investing in Bitcoin following its recent surge post-election may seem attractive; however, individuals should remain cautious and keep in mind the cryptocurrency’s high volatility. It is crucial to maintain a balance between risk and reward, focus on long-term goals, and avoid making impulsive decisions based on market excitement.

Hughes emphasized the importance of staying realistic for investors who may be swept up in the current Bitcoin frenzy. He highlighted the significance of assessing one’s reaction to a potential 50% price decrease to gauge preparedness for the inherent volatility of cryptocurrencies.