Everyone knows about Bitcoin but no one cares about it except once every few years, when it suddenly jumps in price and people start to go crazy. Some people call this pattern a hype cycle. There is no shortage of crazy-ass traders who try to profit during these short-lived periods of perceived irrationality.

Bitcoin price have become more volatile in the past few days which doesn’t really say anything for sure, but it gives many people hope that we’ll see some price action in the near future. Does it make sense to buy Bitcoin in the anticipation of a new price rally? It might, but it’s still a huge risk.

What makes more sense is to use any rapid increase in Bitcoin price to slowly diversify your portfolio. If you have 15% of your portfolio in Bitcoin and one day you realize that this proportion had increased dramatically due to a sudden Bitcoin price spike, there is nothing wrong with reacting promptly and cutting it back to 15% target. It’s easier said than done, but it’s extremely important not to become too greedy and reckless in those crazy times.

Bitcoin bear markets are tough, and they can last for many years. Make sure you can handle sharp and prolonged price declines. Here are my thoughts on Bitcoin as an asset class and here are more details on the benefits of diversification.