Why is Bitcoin dropping right now?
Bitcoin’s Price Dropped Back Below $40,000 As War in Ukraine Drives More Volatility. Here’s How Investors Should React
Bitcoin price dropped back below $40,000 Friday for the first time since Monday. Bitcoin has seen extra volatility in recent days following Russia’s invasion of Ukraine — which has influenced the crypto and stock markets.
After an initial drop below $35,000 following the invasion of Ukraine, Bitcoin got back above $40,000 Monday and stayed above that all week until Friday afternoon. Experts told Next Advisor that more mainstream crypto adoption, a crypto market that is increasingly tracking the stock market, and slumping prices to start the year are all contributing to the volatility with crypto prices we’re seeing right now. Ethereum is following a similar pattern.
Bitcoin had been running above $40,000 for most of February, after a slow start to the year. It’s drop below $34,000 in January was the lowest Bitcoin price had been since July 2021.
Bitcoin’s lagging price in recent weeks comes amid a continuing inflation surge, the stock market worst month since March 2020, and ongoing signals that the Federal reverse will begin raising rates at its next meeting in March in an effort to counteract inflation. Meanwhile, government officials have continued to show an interest in stronger regulation and involvement in digital currencies — including the possibility of creating a government issued digital currency. Ethereum price has followed a similar pattern as Bitcoin in recent weeks.
After nearly hitting $52,000 on Dec. 27, Bitcoin has ranged between $33,000 and $50,000 in the days since.
Despite the recent slump, Bitcoin still entered 2022 on a relative high note, with a strong November and early December that gave way to the recent downward trend. After starting 2021 in the $30,000 range, Bitcoin increased throughout the year and hit its current all time high when it went over $68,000 on Nov.
Why is Bitcoin dropping right now?
For those who invest in crypto for the long-term using a buy-and-hold strategy, price swings are to be expected. Big dips are nothing to be overly worried about, according to Humphrey Yang, the personal finance expert behind Humphrey talks , who says he avoids checking his own investments during volatile market dips.
“I’ve been through the 2017 cycle, too,” Yang says, referencing the crypto crash of 2017 that saw many major cryptocurrencies, including Bitcoin, lose major value. “I know that these things are super volatile, like some days they can go down 80%.
As long as your crypto investments don’t stand in the way of your other financial goals and you’ve only put in what you’re ultimately OK with losing, Yang recommends using the same strategy that works for all long-term investments: set it and forget it.
If this type of extreme drop bothers you, you may have too much riding on your crypto investments. You should only invest what you’re OK losing. But even if the drop is making you rethink your crypto allocations, the same advice still stands — don’t act rashly or upend your strategy too quickly. 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 (though you should still expect volatility when cryptocurrency markets fluctuate).
“Don’t check on it. That’s the best thing you can do. If you let your emotions get too much into it then you might sell at the wrong time, make the wrong decision,” says Yang.
