Main menu


Bitcoin rose after Biden's executive order on crypto, then fell. Here's how investors should react


Bitcoin rose after Biden's executive order on crypto, then fell. Here's how investors should react

Bitcoin rose after Biden's executive order on crypto, then fell. Here's how investors should react

The price of bitcoin quickly rose above — and then fell below -. 40,000 after President Joe Biden signed a sweeping executive order on the cryptocurrency this week.

The price of bitcoin jumped 10% to above 4 42,000 after news of the executive order, which calls on government agencies to develop a plan to regulate cryptocurrency, and consider a central bank-issued digital currency. But the increase was short — lived, with bitcoin later dropping below.40,000-where it was before the executive order was announced.

Biden's order is the first concrete move by the White House to regulate cryptocurrency, which has emerged as a key element of the war in Ukraine that continues to drive additional volatility in the cryptocurrency and equity markets.

Earlier this month, bitcoin briefly topped 4 45,000 on March 2 for the first time since February. 10. After an initial drop of less than 335,000 in February. 24 after the invasion of Ukraine, bitcoin again got above 4 40,000 in February. 28 and stayed above that all week until late last week. Experts told Next Advisor that the adoption of the most widespread crypto, the crypto market increasingly tracking the stock market, and the low prices to start the year all contribute to the volatility with the crypto prices we are seeing now. Ethereum follows a similar pattern.

Bitcoin has been running above 4 440,000 for most of February, after a slow start to the year. Its drop below يناير 34,000 in January was the lowest price for bitcoin since July 2021.

Before the war in Ukraine led to new volatility, bitcoin has already been lagging in recent months amid continuing high inflation, the worst month for the stock market since March 2020, and persistent signals that the Federal Reserve will start raising interest rates at its next meeting in March in an effort to counter inflation. Meanwhile, government officials have continued to show interest in stronger regulation and participation in cryptocurrencies — including the possibility of creating a government-issued digital currency. Ethereum's price has followed a similar pattern to bitcoin in recent months.

The price of bitcoin has been between.37,000 and 4 443,000 so far this week. Here's how the current Bitcoin price compares to its daily high point over the past few months:

One week ago (March 4) one month ago (Feb. 11) 3 months ago (Dec. 11)

$41,787 $43,810 $49,584

Despite the recent recession, bitcoin is still entering 2022 at a relatively high level, with a strong November and early December giving way to the recent downtrend. After starting 2021 in the نطاق 30,000 range, Bitcoin increased throughout the year and reached an all-time high when it exceeded 6 68,000 in November. 10.

Despite pulling back significantly from its most recent ever price, many experts still expect bitcoin to rise above.100,000 at some point-calling it a matter of time, not if. Shortly after bitcoin's latest all-time high in November, ethereum hit a new all-time high when its price exceeded.4,850. Ethereum experienced similar volatility after the latest spike.

The price of bitcoin hit a high in 2021 when it exceeded 6 60,000 in April, and the price action since then has highlighted the volatility of the cryptocurrency at a time when more and more people are interested in getting into the business. In the weeks between the July low point it took below.30,000 and its most recent point in November, bitcoin has swung dramatically up and down. The future of cryptocurrency is sure to involve a lot of volatility, and experts say this is all equal to the cycle.

We've spoken to investment experts and financial advisors who advise against sinking too much of your portfolio into the asset class for this very reason. They work with clients to ensure that volatile crypto investments don't get in the way of other financial priorities, such as providing an emergency fund and paying off high-interest debt. 

"You have a big chance of losing everything, but a small chance of winning it is big,"says Nate Neary, a modern money management executive in San Diego, California. "Do not gamble an amount that will burden your family or prevent you from achieving your goals" if you lose everything, he says.

How does this latest incident compare to previous ones, or even to ordinary stock market drops — and what does it mean for investors? 

What does this price drop mean for crypto investors?

For those who invest in crypto for the long term using a buy and hold strategy, price fluctuations are expected. Big dips aren't too worried, according to Humphrey Yang, the personal finance expert behind Humphrey talks, who says he avoids checking his own investments during volatile market dips.

"I went through the 2017 cycle as well, "Yang says, referring to the 2017" crypto crash " that saw many major cryptocurrencies, including Bitcoin, lose significant value. "I know these things are very volatile, like some days they can go down by 80%.”

Experts recommend keeping your cryptocurrency investments to less than 5% of your portfolio. If you've done so, don't stress volatility, as it will continue to happen, according to Bill Noble, chief technical analyst at token metrics, a cryptocurrency analytics platform.

"Volatility is as old as the hills, and it's not going anywhere,"says Noble. "It's something you have to deal with.”

As long as your crypto investments don't stand in the way of your other financial goals and you've just put in what you're OK to end up with losing, Yang recommends using the same strategy that works for all long-term investments: set it and forget it. 

If this kind of steep decline bothers you, you may have a lot of riding on your crypto investments. You should only invest what you are OK losing. But even if the decline makes you rethink your crypto allocations, the same advice still stands — don't act rashly or flip your strategy too fast. Reconsider what you might be more comfortable with going forward, such as allocating less to crypto in the future or diversifying through crypto-related stocks and blockchain funds rather than directly buying crypto (although you can still expect volatility when cryptocurrency markets fluctuate).

"Do not check on it. This is the best thing you can do. "If you let your emotions get too involved, you might sell at the wrong time, and make the wrong decision,"Yang says.

What if you are interested in crypto, but have not yet invested?

Yang's approach and forgetfulness to crypto reflects his philosophy of investing in the traditional stock market, but some experts feel that cryptocurrency is too different from traditional investments to draw any historical comparisons. That is why Shira Nelson from smart girl money stays away.

Nelson invests primarily in low-cost index funds because "I can see the history on it," she says. The novelty of the cryptocurrency and the lack of traceable data make it wary of these crazy fluctuations. 

Potential investors looking to buy the dip should understand that the volatility is equal to the cycle, and be prepared for this type of volatility in the future.  Even if you invest now, with relatively low prices, be prepared for them to fall even more. Again, just put in what you're comfortable with losing — after you've covered other financial priorities, such as emergency savings and more traditional retirement funds.

What's behind bitcoin's latest decline? 

Many investors see bitcoin price fluctuations as part of the game, but "volatility is difficult for individual investors to handle," says Noble. Like Yang, he warns against selling too quickly.

The recent price volatility came on the heels of rising inflation, ongoing uncertainty over the country's ongoing battle with covid-19 and new regulatory actions by the U.S. government, including Biden's recent executive order. In a new and unproven industry like cryptocurrency, it doesn't take much to drive big price fluctuations. Overall, new short-term investors selling their holdings in reaction to the recent decline may be contributing to bitcoin's depreciation, according to a report by glassnode Insights, a blockchain analysis firm.

While volatility is expected, Noble says he was surprised by some recent big declines. "I thought the market was maturing and these things would be less frequent and intense. Boy was I wrong, " he says. 

Some of these declines have resulted from a combination of factors, according to Nobel theory, from excitement about low-quality coins, to negative remarks from Elon Musk, to China's recent crackdown on crypto services. This combination of factors has the potential to make sales "more violent," says Noble. 

It likens the decline to the stock market crash of 1987, from which markets took months to recover. But because crypto is moving much faster today than stocks in 1980, Noble says we may see a faster recovery. 

"Do not panic and vomit,"says Noble. "If you keep your positions small, you can try to withstand volatility.”


table of contents title