The crypto market made massive progress in 2021, but we can see significant swings that have scared many crypto investors in 2022. The price of Bitcoin has dropped below $31,000, and many investors panicked. But don’t run from crypto before you read the article.
Bitcoin’s price dropped
The bitcoin's price decreased below $26,000 for the first time in 16 months, amid a sell-off in cryptocurrencies that erased more than $200 billion from the entire market in a single day. Ethereum, the most well-known altcoin, tanked to as low as $1,704. It’s the first time the token has fallen beneath the $2,000 mark since June 2021.
TerraUSD (UST) is intended to be pegged to the $1 but it sank as low as 12 cents and collapsed in a run as investors panicked and sold off their tokens. The Terra blockchain has since officially halted.
Some crypto investors are fleeing from cryptocurrencies. Many crypto investors think about what they should do to save their money. Potential crypto investors are as scared as experts.
What’s behind the latest bitcoin drop? Are crypto market collapsed?
Don’t panic
First, Bitcoin saw its dropping below $31,000 for the first time since July 2021. Such bitcoin’s price was just over a year ago and it means that you don’t need to pay 10,000 bitcoins for pizza. Bitcoin is still a valuable digital asset.
Second, сryptocurrencies have plunged in tandem with Wall Street, and are almost on par with the tech-centric Nasdaq, as investors fret about the Federal Reserve’s next moves to tame inflation. When the Federal Reserve raises interest rates to combat levels of inflation unseen in the U.S. for forty years, it has the effect of lessening demands for more growth companies, like tech stocks and speculative risk assets like Bitcoin. Cryptocurrencies are a part of the economy.
Third, the volatility of cryptocurrencies makes them attractive for investment and risky at the same time. If you seek shelter, you should invest in low-risk assets such as US Treasury bonds but the profitability of assets is also low. By investing in Bitcoin, many investors expect that the speculative craze hasn't diminished, and they will be able to sell it again for much more than they paid. But recent history should be that such plans, while tempting, are never easy to achieve. . The thrill of speculatively investing is not the best strategy because bitcoin is a long-term asset.
Looking back at every past bitcoin downturn, there is absolutely no need to panic in such a situation.
Should you own bitcoin? Should you invest in bitcoin now?
It doesn't really matter who you are, a first-time crypto investor or an experienced crypto trader. The most important thing is to be prepared for the bear market. You should hold or even increase your position if you're set up because bitcoin is a long-term asset. The price drop is a good time to buy bitcoins and use a buy-and-hold strategy. Volatility is as old as the hills, and it's not going anywhere. Keep your cryptocurrency investments under 5% of your portfolio. If you've done that, don't stress about the swings because they will keep happening. If you want to invest in altcoins, you should create a balanced portfolio.
Anyway, bitcoin down is an opportunity for growth, and you can take this opportunity.
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