The first week of 2022 wasn’t kind to Bitcoin, as the cryptocurrency lost 11% of its value in just a few days and ended this week at around $42,000 – nearly 40% off its all-time high last fall.
Analysts who closely monitor cryptocurrencies said the Federal Reserve’s hint of a sooner-than-expected rate hike caused many investors to sell their bitcoin holdings and shift toward safer investments. Other cryptocurrencies including Ethereum and Ripple are also down this week, down 13.5% and 9%, respectively.
This is par for the course in the highly volatile crypto market, where investors expect significant volatility to continue into 2022.
“It’s part of the game,” Ryan Firth, a financial planner at Mercer Street Financial, told CBS MoneyWatch. “You have to hold on tight and go with eyes wide open. You can see an 80% drop in a few months.”
For investors, 2021 was an exciting year for cryptocurrencies. Bitcoin price saw a high of $69,000 in November, while Ethereum hit a record high of $4,404 in October.
In a sign of the growing importance of cryptocurrencies, there are a number of major programsas payments. Some athletes and politicians started in crypto, while Wall Street created exchange-traded funds around cryptocurrency futures.
With the price of Bitcoin, Ethereum and others on the rise, crypto companies have taken great strides.and Crypto.com have aired a commercial featuring Hollywood star Matt Damon.
In perhaps its biggest move yet, the crypto world capped 2021 with Crypto.com buying the naming rights to the Staples Center in Los Angeles and renaming the Crypto.com Arena sports stadium in a $700 million deal.
“We will see more crypto companies going public in 2022 than we saw in 2021, and many of them will have valuations in excess of $5 billion,” blockchain analytics firm Arcane Research predicts in a research note.
Arcane also appears to have more crypto ETFs on the horizon, providing investors with a way to test the waters while limiting the downside.
Don’t look down
However, Firth warned that investing in digital currency is “not for the faint of heart,” who personally invests in cryptocurrencies while advising his clients not to put more than 5% of their portfolio in such a volatile asset. Some days the investor will see massive gains, but “you should still prepare for that sudden drop of more than 50% in a week or so,” he said.
Andrea Hardison, a project manager at a technology consultancy in Nashville, said she expects huge volatility in cryptocurrency prices in 2022 just like last year. But Hardison, who began buying cryptocurrency last April, still plans to continue pumping more money into hex, bitcoin, solana and ethereum, noting that some of its bets are It has already doubled in value.
Robert White III, a St. Louis workforce development worker, is similarly unfazed by the cryptocurrency market. White, the Bitcoin owner, said that he plans to take a portion of his salary directly to buy cryptocurrencies.
“My approach will be consistent and consistent,” said White, who bought the first bitcoin in 2017 when it sold for $1,100. “Hopefully you will triple what you invested in, but cryptocurrencies are so volatile that they can go in so many different ways in a day.”