Latest Crypto News: Bitcoin and Ethereum Fall Over 20%, UST Stablecoin Struggles

There continues to be extra volatility in the crypto markets, and experts predict the ups and downs to continue as investors wrestle with continued surging inflation, geopolitical tensions, and changes in U.S. monetary policy.

Cryptocurrency’s wider adoption and its recent alignment with the stock market make it even more linked with macroeconomic factors. The Federal Reserve’s decision to raise interest rates sent the stock and crypto markets into a downward spiral that persisted throughout the weekend and Monday.

Bitcoin and ethereum are down over 20% over the last week. Bitcoin dropped below $30,000 Monday evening — its lowest level since July 2021. Ethereum has followed bitcoin’s lead, with its price trading near $2,200 Monday.

“Bitcoin is breaking below some key technical levels as the never-ending selloff on Wall Street continues. ​ The institutional investor is paying close attention to bitcoin as many who got in last year are now losing money on their investment,” Edward Moya, senior market analyst at foreign-exchange brokerage Oanda, wrote in a market analysis. “If the USD 30,000 level breaks, that could trigger a flash crash environment if several whales unload. ​”

Either way, experts advise not to make financial decisions based on news-related panic or hype. Here’s what investors should make of the latest crypto news:

• It’s been a shaky start to the week for Bitcoin and other cryptocurrencies, largely driven by ongoing macroeconomic uncertainty. Bitcoin, the largest crypto, dipped below $36,000 Saturday and continued to nosedive throughout the weekend, hitting its lowest point in over a year Monday. And one expert warns bitcoin could drop even further, below $30,000 for the first time since July 2021. Bitcoin could “potentially get a mini-bounce at $35,000, but unless we break the trend line at approximately $37,000, I’m calling for $29,000 in the coming weeks or week,” says crypto expert Wendy O in a recent TikTok video. Ethereum has been following a similar pattern, rapidly declining to $2,300 Monday.
• TerraUSD (UST), the third-biggest stablecoin, has dropped below $1 level twice in the last three days, falling to $0.985 on Saturday and as low as $0.937 on Monday, according to CoinMarketCap data. This is problematic for the crypto markets as stablecoins are intended to bring stability and should hold as close to $1 as possible. It has forced Terraform Labs — the project behind UST, crypto LUNA, and the Luna Foundation Guard — to dip into its $3.5 billion reserves of bitcoin to support the stablecoin. Terraform Labs emptied its treasury wallet of all of its bitcoin Monday, equivalent to $1.5 billion, to lend out to trading firms, in an effort to help hold UST’s price peg. Terraform Labs founder Do Kwon tweeted Monday that it’s “deploying more capital,” but didn’t provide more details.
• Coinbase announced in April that it was launching an NFT marketplace in beta mode, allowing only a small set of users to test out the platform. Now, Coinbase is opening its beta NFT marketplace to all users, allowing anyone to buy, sell, or trade non-fungible tokens, just two weeks after its initial launch. A spokesperson for Coinbase said additional marketplace features are “still to come,” and Coinbase will “disclose details at a later date.

Bitcoin is the largest cryptocurrency by market cap, and a good indicator of the crypto market in general, since other coins like Ethereum (and smaller altcoins) tend to follow its trends. Even though Bitcoin recently set another new all-time high, it was a pretty normal uptick for the crypto, which is notorious for its volatility. That’s not to say investors should take swings in either direction lightly, and this is also why investing experts recommend not making any major investment changes based on these normal fluctuations.

Cryptocurrency is still very new, and everything from innovation to regulation can have an outsize impact for investors. Here’s how you can invest smartly, regardless of what’s making news or Bitcoin’s price swings.

What You Should Know About Crypto Investing

How Investors Should Deal With Volatility

Cryptocurrency volatility is nothing new, and you should be comfortable with this if you decide to invest. 

Volatility can be attributed to an “immature market,” says Ollie Leech, learn editor at Coindesk, a cryptocurrency news outlet. Anything from a celebrity tweet to new federal regulation can send prices spiraling. 

“If Elon Musk puts hashtag Bitcoin in his Twitter bio, it sends Bitcoin up 10%,” says Leech. 

This unpredictability is part of the reason why investing experts warn against investing huge amounts of your portfolio into a risky asset like crypto. Many recommend keeping your crypto holdings to less than 5% of your total portfolio. 

For new investors, day-to-day swings can seem frightening. But if you’ve invested with a buy-and-hold strategy, dips are nothing to panic about, says Humphrey Yang the personal finance expert behind Humphrey Talks. Yang recommends a simple solution: don’t look at your investment. 

“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.

This is the traditional “set it and forget it” advice that many traditional long-term investors follow. If you can’t get on board, and the extreme dips continue to cause you worry, then you might have too much riding on your cryptocurrency investments. 

“The most important thing any investor can do, whether they are investing in Bitcoin or stocks, is not just to have a plan in place, but to also have a plan they can stick with,” says Douglas Boneparth, a CFP and the president of Bone Fide Wealth. “While buying the dip might be attractive, especially with an asset that you really like, it might not always be the best idea at the moment.”

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