As Bitcoin Spirals Down, What Moves Should Investors Make?
Several factors, including rising inflation, geopolitical crises, and shifting monetary policy in the United States, continue to make the crypto and stock markets more volatile in the short term. In recent months, the cryptocurrency market has resembled the stock market. This has increased its ties to the global economy.
Bitcoin's price was below $40,000 on March 5. This was before President Joe Biden signed a broad executive order on cryptocurrencies, causing the price to rise by 10% to more than $42,000. Biden's executive order directed government agencies to develop a plan for regulating cryptocurrencies. He also directed them to consider issuing a central bank-issued digital currency. It was the White House's first significant step toward regulating cryptocurrencies. By the end of March, the price of Bitcoin had remained above $45,000 and had frequently surpassed $48,000.
Bitcoin’s Best Price This Year
Bitcoin's best day so far this year was January 2, when it was nearly $48,000. However, it has lost 40% of its value since it reached a price of over $68,000 on November 10. Despite a significant drop in the price since November, its new highs in 2021 and recent prices are still very impressive.
Ethereum, the second most popular cryptocurrency, broke the $4,800 barrier in November. As for Bitcoin, it has ranged in price last week from $36,000 to $38,000. Both Bitcoin and Ethereum have fallen from their all-time highs since then. However, many analysts believe Bitcoin's price will eventually rise above $100,000.
Bitcoin is still a very risky and volatile investment. Last year, the original cryptocurrency skyrocketed in mid-April, losing more than half of its value and falling below $30,000 in mid-July. The cryptocurrency has also experienced a similar case this year. Bitcoin fell back below $35,000 this month, just a few months after reaching a new high in November.
What Moves Should Investors Make?
According to most crypto experts, there is nothing crypto investors can do. Given the volatility of the cryptocurrency in the past, this increase does not imply that it will fall in the long run. It's just as likely that the price of Bitcoin will fall as it used to rise. Long-term cryptocurrency investors, according to experts, will continue to face significant volatility in the future.
Investors in cryptocurrencies should expect the market to remain volatile. According to experts, you should not invest more than 5% of your money in cryptocurrency. Humphrey Yang, a Brand Strategist & Marketing Consultant, recently told NextAdvisor, "I know that these assets are very risky because they can drop by 80 percent." However, if you believe Bitcoin will not be valuable in the long run, avoid investing in it. That is the best thing you can do."
A price drop should not change your mind about buying cryptocurrency. Also, a sudden price rise should not change your long-term investment plan. More importantly, you should not buy more cryptocurrency simply because its price is rising. Before investing in a risky asset like Bitcoin, ensure your finances, including your retirement accounts and emergency savings, are in order.
Bitcoin's most recent significant price increase is not the first time this has occurred. However, Kiana Danial, the founder of Invest Diva, claims that while Bitcoin's price has risen over time, it has been extremely volatile. Therefore, as Danial has stated, investors should continue to hold and not be concerned about the changes.
Will The Price Of Bitcoin Rise If The Stock Market Crashes?
Not necessarily. Bitcoin supporters see it as a way to diversify their investments. However, it performed no better than stocks at the start of the coronavirus pandemic. This is due to investors becoming fearful and selling everything.
The bitcoin price fell by more than 40% in the first two weeks of March 2020. According to Rosie Bullard, a partner and portfolio manager at James Hambro & Partners, concerns about Covid-19 caused all stock markets to fall sharply at the time.
As a result, it was not a good way to save money when the stock market fell. However, how crypto assets perform when the stock market falls depends on what caused the financial market to crash. Most bitcoin investors believe that the cryptocurrency will protect them from another inflationary shock like the one that occurred in 1974.
Will Bitcoin Recover?
When it comes to investing, there are no guarantees. Bitcoin can go up as quickly as it can go down. As it is so volatile, it may pick up speed again in the future (perhaps weeks, months, or even years down the line). Also, because no one has a crystal ball, no one can predict whether bitcoin will crash in the future.
According to Yang, the best thing to do is to avoid crypto, regardless of how much it costs. You can set it and forget it, just like a traditional long-term investment account. "If you let your emotions take over too much," Yang says, "you might sell at the wrong time or make the wrong choice."