Bitcoin hit a new record peak in November. For those who invest in crypto, there’s more volatility to keep an eye on.
A variety of factors like the rising cost of living, geopolitical tensions as well as the shifting U.S. monetary policy -are causing additional immediate volatility to the cryptocurrency and market for stocks. The cryptocurrency market has increasingly been a part of the stock market over the recent months, making it even more interconnected to global economic trends.
Terra USD (UST) one of the biggest stablecoins has also played a role to the Bitcoin crash of this week, according to experts. Stablecoins aim to provide stability to market for crypto and should be able to hold the closest to $1 possible. However, UST fell lower than 29 cents this week, as investors panicked and were forced to sell their tokens.
“Bitcoin has been a casualty of the broader market selloff of risky assets, but the latest crisis with stablecoins triggered the collapse of the $30,000 level, which was a key entry point for many institutional investors,” Edward Moya, senior market analyst at foreign exchange broker Oanda published in an Market analysis. “Confidence has been waning in the cryptoverse but it seems we are getting close to the end of the market sell-off.”
The Fed increased rates of interest the 4th of May, by 0.50 percent, the biggest move since 2000, as an effort to curb inflation. The Fed also announced plans for the process of removing its 9 trillion-dollar balance sheet in June. The consumer price index for March, which measures changes in the price of housing, food fuel, gasoline, utilities and other products, increased by 8.5 percent from the previous year -the highest inflation increase since 1981. The conflict in Ukraine is contributing to increased volatility in the market.
“Like all risk assets, crypto prices this year have been disproportionately driven by the war in Ukraine, inflation, and the outlook on Fed Policy (particularly the taper schedule),” says Ben McMillan, CIO at IDX Digital Assets. “So while we’re seeing crypto prices at relatively attractive prices on a longer-term outlook, there could still be a considerable downside in the near-term.”
The peak of Bitcoin’s year to date is the early weeks of January. It exceeded $48,000 on January. 2. It has not fallen below the low of late January just below $34,000, which was the lowest level it was during the preceding six months. Bitcoin was able to lose 40 percent in value from the November. 10-year-high that was above $68,000. Although the price of Bitcoin has seen several major declines in November however, the new highs it reached in 2021 and the current price remain an amazing accomplishment considering its modest beginnings, and its price was below $10,000 in July 2020. Ethereum — the second most-loved cryptocurrency — set a new record in its own time as it surpassed $4,800 in November.
The Bitcoin price range has been between $26,000 and $34,000 thus this week. Here’s how the current price of Bitcoin compares to its high daily price over the last few months:
Although Bitcoin along with Ethereum have had their some ups and downs, but not to their record-setting highs in the past the beginning of time, many experts believe that the price of Bitcoin to go over $100,000 at some point.
The volatility is a permanent truth about Bitcoin that it remains an extremely volatile and risky investment. Actually the time that Bitcoin hit an all-time record in mid-April and then suddenly lost nearly 50% of its value, and dropped to as low as $30,000 in mid-July. Similar to that, Bitcoin dropped back below $35,000 in the month that followed following its latest record-setting November high.
So what can crypto investors do to mitigate this fluctuation? According to the experts we’ve spoken with. With the history of Bitcoin’s fluctuations, this price increase does not ensure a long-term reverse. The Bitcoin price is as likely to go to its lowest as it is likely to keep increasing. It’s likely that the the future for cryptocurrency is likely to bring many more fluctuations Experts say that’s something investors who have been investing in crypto for a long time will need to deal with.
If you’re investing in crypto you can expect volatility to persist. Experts recommend limit your cryptocurrency investments at a minimum of five percent of your portfolio.
“I know these things are super volatile, like some days they can go down 80%,” Humphrey Yang is the expert in personal finance of Humphrey Talks, previously stated to NextAdvisor. “But If you are convinced of the long-term future of [Bitcoin, don’t bother checking on the situation. That’s the most prudent thing you could do.”
As you wouldn’t let price fluctuations influence your decision to purchase cryptocurrency, don’t let a abrupt price increase affect your investment strategy over the long term. More importantly is to not buy more cryptocurrency because it’s price is increasing. Make sure that your financial foundations are in place from savings accounts for retirement up to your emergency funds prior to putting any money you have saved into a risky asset such as Bitcoin.
The latest surge in Bitcoin’s price isn’t a new phenomenon. “While in the long-term Bitcoin’s price has generally gone up, we experience a lot of volatility along the way,” says Kiana Danial, the founder of Invest and Diva.
Investors should hold and not be concerned about volatility, just like Danial who claims that she’s “jumping on the hype.”
It doesn’t matter if cryptocurrency is moving upwards or downwards the best option is not think about it. Make it a point to forget it as you would with any other traditional investment account. “If you let your emotions get too much into it then you could sell at the wrong time, or you might make the wrong decision,” Yang says. Yang. “You stress out about it, and I don’t think that’s a healthy way to approach it.”