fred wilsonFred Wilson, VC at Union
Square Ventures, thinks a cryptocurrency crash is inevitable in
the long run.
REUTERS/Lucas
Jackson

Cryptocurrencies like bitcoin and ether have unleashed an
investor frenzy — and a chorus of warnings that
speculative bubble
is about to burst
.

The latest warning comes from Fred
Wilson, a venture capitalist and co-founder of Union
Square Ventures. 

His advice: diversify your bitcoin assets before it’s too
late.

“I am certain the big crash will happen. I don’t know when
it will happen and I think it may be some time before it does,”
Wilson
writes in a post on his blog on Sunday

Unlike some crypto
skeptics
, Wilson is a believer in the new blockchain-based
currencies. But he also has the wisdom of personal experience,
and he believes some bitcoin bulls may be blind to the risk
they’re facing.

Wilson lost 90% of his worth during the dot com bubble and crash
of 2000. The 10% he retained came from two major real estate
investments, which eventually became the entirety of his
net-worth.

“We were not diversified. We had all of our money in
venture capital and internet stocks and had ridden that wave all
the way up,” he wrote. “
Had we not sold Yahoo! and other
stocks to purchase the real estate and pay the taxes on the
gains, we would have been wiped out completely.”

While the US economy still appears to be
on
 stable ground,
Bitcoin is already on the decline from a wild summer. The
cryptocurrency kept many investors on the edge of their seats, as
the price shot up dramatically between March and June,
before reaching an all-time high of $4,765 on September
1. 

For some, cryptocurrencies have been a life-altering
investment. (Just ask this
house full of
 Millennial bitcoin
millionaires.) But to Wilson, that’s all the more reason to
move that money into other stocks and assets. 

The ideal portfolio, he says, is a mix of cash assets like
money market funds, blue chip stocks like Amazon and Google, real
estate, and a “risk bucket” with things like venture capital
investments and crypto. While Wilson said he only has about 5% in
crypto, he would recommend an investment 10% to 20% of
one’s network “for people who are young or who are true
believers.”

“It is fine to be a true believer and being all in on
crypto has made [some investors] a lot of money,”
Wilson writes. “But preservation of capital is about
diversification and I think and hope that they will take some
money off the table, pay the taxes, and invest it
elsewhere.”

 


Read Wilson’s full blog post here.

Get the latest Bitcoin price here.

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