Bitcoin Is Back Above $40,000. Here’s What Investors Should Make of It

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Bitcoin is back above $40,000 on Wednesday, after President Joe Biden signed a sweeping deal executive order on cryptocurrencies.

The executive order marks the first concrete steps by the White House to regulate cryptocurrencies, and comes as cryptocurrencies have emerged as a key element in the war in Ukraine that continues to drive additional volatility in the crypto and stock markets.

The crypto market has been following the stock market more and more lately, which, combined with more widespread adoption and the price drop we have seen at the start of the year, makes it even more intertwined with the developing circumstances in Europe. from the East, experts say.

Bitcoin briefly broke above $45,000 on March 2 for the first time since early February. Despite its ups and downs, Bitcoin has held above its January low of under $34,000, which was the lowest in the previous 6 months. Bitcoin price has seen a 40% drop from its all-time high above $68,000 on Nov. 10, pulled back by rising inflationlagging recovery in Work marketand the Ongoing signals from the Fed that it would begin to scale back pandemic measures to support the economy.

Bitcoin price has been between $37,000 and $42,000 so far this week. Here is how the current price of Bitcoin compares to its daily high in recent months:

A week ago (March 2) A month ago (February 9) 3 months ago (December 7)
$45,077 $44,716 $50,198

Time The price of Bitcoin has experienced multiple major drops since November, its new highs in 2021 and current price is still an impressive feat considering its humble beginnings and a price below $10,000 in July 2020. Ethereum, the next most popular crypto, got another new all-time high on its own when it topped $4,800 in November.

Although Bitcoin and Ethereum have both bounced back below their all-time highs since then, many experts are still waiting. Bitcoin price will exceed $100,000 sometime.

The volatility highlights a lasting truth for Bitcoin: It remains a highly volatile and speculative investment. In fact, the last time the original cryptocurrency set a record in mid-April, it abruptly lost more than half its value and crashed to around $30,000 in mid-July. Similarly, Bitcoin dipped below $35,000 again this month shortly after its most recent high from November.

So what should crypto investors do in light of this volatility? Nothing, according to the experts we’ve spoken to. Given the history of volatility in cryptocurrencies, this surge does not guarantee a long-term reversal. The price of Bitcoin is just as likely to fall again as it is to continue to rise. the future of cryptocurrency It is sure to include a lot more volatility, and experts say that is something that long-term crypto investors will have to continue to deal with.

What investors need to know

If you are investing in cryptocurrencies, expect volatility to continue. This is why experts recommend keeping your cryptocurrency investments to less than 5% of your total portfolio.

“I know these things are super volatile, like some days they can go down 80%,” Humphrey Yang, the personal finance expert behind Humphrey Talks, previously told NextAdvisor. “But if you believe in the long-term potential of [Bitcoin], just don’t check it. That’s the best you can do.

Just as you shouldn’t let a price drop influence your decision to buy cryptocurrencies, don’t let a sudden price spike upset your long-term investment strategy. Even more importantly, don’t start buying more crypto just because the price is going up. Always make sure your financial foundations are covered, from your retirement accounts to emergency savings — before putting extra money into a speculative asset like Bitcoin.

Bitcoin’s latest big jump is also nothing new. “While over the long term the price of Bitcoin has generally gone up, we experienced a lot of volatility along the way,” says Kiana Danial, founder of invest diva.

READ MORE: How much to invest in cryptocurrencies, according to 5 experts

Investors should continue to hold and not worry about fluctuations, like Danial, who says he’s not “jumping on the hype”.

It doesn’t matter if cryptocurrencies go up or down, the best thing you can do is not to look at them. Set it up and forget it like you would any traditional long-term investment account. “If you let your emotions get too involved, then you might sell at the wrong time, or you might make the wrong decision,” says Yang. “You get stressed about it, and I don’t think that’s a healthy way to approach it.”

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