There continues to be extra volatility in the crypto market, and experts predict the ups and downs to continue as investors wrestle with rising inflation, geopolitical tensions, and potential changes in U.S. monetary policy.
Bitcoin’s price slid under $40,000 early Wednesday before rebounding. It continues to hover above $41,000 as of Wednesday afternoon. Ethereum has followed a similar pattern, falling below $3,000 earlier in the week and spiking back up within a day.
The war in Ukraine, which has sent millions of Ukrainians fleeing and thousands of Ukrainians have been killed, is one of several factors contributing to increasing volatility in the crypto and stock markets. Cryptocurrency’s wider adoption and its recent alignment with the stock market make it even more linked with the international conflict. Other factors at play are surging inflation and possible shifts in monetary policy by the Federal Reserve. 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:
- Robinhood has added four crypto tokens to its trading platform, bringing its total cryptocurrency offerings to 11. The new crypto coins available on Robinhood are Ethereum competitor Solana, memecoin Shiba Inu, Ethereum scaling tech Polygon, and decentralized finance token Compound. Ever since Robinhood began offering crypto trading in 2018, it has been slowly adding more tokens to its mix for customers to buy and sell.
- BlackRock, Fidelity, and several other firms announced they are investing $400 million in Circle, the issuer of USD Coin (USDC). USDC, the second largest stablecoin, is pegged to the U.S. dollar on a 1:1 basis. In addition to the investment, BlackRock announced it will become the primary asset manager of USDC cash reserves and explore capital market applications for its stablecoin.
- An NFL team is partnering with a crypto exchange for the first time ever, which could bring further mainstream adoption of digital assets. The Dallas Cowboys announced a long-term, exclusive deal with Blockchain.com Wednesday. The agreement will include branding, advertising, content and event opportunities, but will not include naming rights to the Cowboys’ stadium.
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 outsize impact for investors. Here’s how you can invest smartly, regardless of what’s making news or Bitcoin’s price swings.
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.”
Top Crypto News From Recent Months
President Joe Biden signs crypto executive order
President Joe Biden signed an executive order on cryptocurrency, marking the first concrete steps by the White House to regulate digital currency. The executive order outlines what government agencies, including the Treasury Department, need to do to develop policies and regulations on cryptocurrencies. It also calls on U.S. agencies to make sure the country’s cryptocurrency laws align with those of U.S. allies, and tasks the Financial Stability Oversight Council to investigate any illicit financial concerns. Additionally, the order puts new urgency on the possibility of a new government-issued central bank digital currency.
Cryptocurrency stars in Super Bowl ads
Cryptocurrency made a splash at the Super Bowl this year, with multiple cryptocurrency exchanges airing ads. The crypto ads captured America’s attention, but not everyone loved them. Senate Banking Chairman Sherrod Brown blasted them during a senate committee hearing last week, saying the ads lacked transparency and “left a few things out.” The hearing was another government meeting on stablecoins, where U.S. lawmakers echoed similar past sentiments about how more regulation is needed.
New York Stock Exchange wants to get in on NFTs
The New York Stock Exchange, the world’s largest stock exchange by market capitalization, wants to be the marketplace for NFTs just like with stocks. The exchange filed an application with the U.S. Patent and Trademark Office to provide an online marketplace for digital goods including NFTs, cryptocurrencies, digital media, and artwork. If the exchange’s plan comes to fruition, it would compete with other popular NFT marketplaces like OpenSea and Rarible.
Colorado will accept crypto for tax payments
Colorado Governor Jared Polis announced that the state will begin accepting crypto payments for taxes and other state-related transactions by the end of summer. Polis said during an interview with CoinDesk that Colorado will partner with crypto companies to effectively accept and convert Bitcoin into U.S. dollars. “We don’t want to take the speculative risk of holding crypto, so we will have a transactional layer there and it will be entered in our system as dollars,” he says. “For consumer convenience, we want to accept payment in a wide variety of cryptocurrencies, just as we do with credit cards.”
Proposed legislation weighs in on stablecoins
New Jersey Rep. Josh Gottheimer unveiled an early draft of legislation that would place clear definitions around U.S. dollar-backed stablecoins. The proposed legislation would designate certain stablecoins as “qualified,” making them redeemable on a one-to-one basis for U.S. dollars, and institute traditional deposit insurance on stablecoin holdings. The bill also states that qualified stablecoins would only be issued by banks or non-bank institutions that satisfy certain regulations.
JP Morgan enters the metaverse
JP Morgan has officially entered the metaverse, opening a lounge in Decentraland, a virtual world based on blockchain technology. The “Onyx lounge” was unveiled along with a report from the bank outlining “limitless” opportunities for businesses in the metaverse and why there is “explosive interest.” JP Morgan is the largest bank in the U.S. and the first to participate in the metaverse.
Coinbase partners with Mexico for withdrawals
Coinbase announced it’s launching a service that allows cryptocurrency recipients in Mexico to cash out their funds in pesos. The service will be offered at over 37,000 locations across the country, free of charge through March 31, after which customers will be charged a “nominal fee that’s still 25-50% cheaper” than traditional international payment options, according to a Coinbase blog post. Cryptocurrency has drawn interest for cross-border payments and money transfers, because of its potential as a faster and cheaper method to transact compared to more traditional options.
Meta scraps stablecoin project
Mark Zuckerberg’s plan to launch stablecoin project Diem has hit a dead end. Meta, formerly branded as Facebook, announced this week it sold its assets and intellectual property to crypto bank Silvergate Capital. The bank paid $182 million for the project, according to a press release. Though Meta is no longer involved in the project, Diem CEO Stuart Levey said in a press release he has “confidence in Silvergate’s ability to take Diem’s technology forward.” In the press release, Silvergate CEO Alan Lane said they plan to launch a stablecoin by 2022.
India announces digital currency
India announced plans this week to launch a digital version of the rupee and place a 30% tax on income from digital assets as soon as this year. It’s the latest major economy to announce an official virtual currency, as China trials the digital yuan and other countries, including the U.S., continue to explore the idea. According to a Chainanalysis report, India is one of the fastest-growing markets for cryptocurrency, though it has had a hot-and-cold relationship with it. In 2018, it effectively banned crypto transactions, but the Supreme Court struck down the restriction in March 2020.
White House prepares government crypto strategy
Bloomberg reported the White House is planning to release an initial government-wide strategy for crypto and other digital assets as soon as next month, and will ask federal agencies to assess their risks and opportunities. Bloomberg cited people familiar with the matter, saying senior administration officials are holding several meetings and drafting an executive order that will be presented to President Joe Biden in the coming weeks. The report suggests the Biden team is facing pressure to take the lead on the issue since federal agencies have so far taken a scattered approach.
Tech companies explore NFTs
Large tech companies continue to explore and integrate NFT technology into their services. Last week, Twitter became the first major social media platform to introduce NFT-based profile pictures. This new feature comes with limitations, however. To have a NFT profile picture, you’ll need to have bought or minted an NFT on an Etherum-based marketplace first. You also need a Twitter Blue subscription, and an iOS device to set an NFT as your profile picture, which appears in a hexagonal shape. A lot of people, including Elon Musk, have taken to Twitter to express their frustrations with the new feature. In a tweet Musk said, “Twitter is spending engineering resources on this bs while crypto scammers are throwing a spambot block party in every thread!?”
Fed releases long-awaited crypto report
The Fed released a long-awaited report exploring the pros and cons of government-issued crypto, but ultimately took no position on the matter. Instead, they’re asking the public to weigh in. Through May 20, 2022, the Fed is asking Americans to provide public comment on the possible rollout of a digital dollar. A central bank digital currency (CBDC) would essentially be a digital form of cash, issued and backed by America’s central bank. The U.S. isn’t the only country exploring or launching its own CBDC. Central banks all over the world, from China to Sweden, are experimenting with the adoption of digital currencies.
Walmart could be entering metaverse
Walmart may be quietly entering the metaverse with the intent to make and sell virtual goods. It has plans to create its own cryptocurrency and collection of NFTs, according to several applications filed with the U.S. Patent and Trademark Office last month. The retail giant is the latest corporate player to show interest in crypto and the metaverse, which can potentially lead new revenue streams for retailers.
Crypto.com suspends withdrawals
Crypto exchange Crypto.com suspended withdrawals on its platform last week after there were reports from a “small” number of users of “suspicious activity.” The Singapore-based firm made the announcement via Twitter, adding that all funds were safe. After several hours, the exchange issued an update saying users were required to sign back into their accounts and reset their two-factor authentication. Technical issues and widespread outages on crypto trading platforms are nothing new. Over the last year, similar situations have occurred with crypto exchanges Coinbase, Binance, and Kraken.
Major banking group sees a future for crypto
Rob Nichols, president of American Bankers Association, a major U.S. banking trade group, said in a recent blog post that crypto isn’t “going away” and banks are exploring ways to “safely and responsibly” introduce crypto service for customers. It’s further proof that crypto is becoming more mainstream among investors. But in order for there to be more mainstream adoption of crypto, banks need “regulatory clarity,” said Nichols.
North Korean hackers steal $400 million in crypto
Nearly $400 million worth of digital assets were stolen by North Korean hackers, according to a Chainalysis report published recently. Ether accounted for most of the stolen funds, followed by altcoins, ERC-20 tokens, and Bitcoin, according to the report. According to Chainanalysis, security researchers believe many of last year’s attacks were carried out by a group labeled as advanced persistent threat 38 (APT38), also known as Lazarus Group.
Banks team up to create stablecoin
Several U.S. banks are joining together to offer their own stablecoin, which they’ll call USDF, according to a press release. Founding members of this new stablecoin include New York Community Bank, FirstBank and Sterling National Bank — all FDIC-insured institutions. USDF is an alternative to non-bank-issued stablecoins, such as Tether, and will be minted exclusively by U.S. banks. According to the release, USDF “addresses the consumer protection and regulatory concerns of non-bank issued stablecoins and offers a more secure option for transacting on blockchain.”
FTC warns of “new spin” on crypto scams
The Federal Trade Commission is warning consumers about a “new spin” on crypto scams. The U.S. consumer protection agency says scammers are calling people pretending to be from the government, law enforcement, or a local utility company and luring people to send them money through cryptocurrency ATMs. The FTC’s warning comes in the midst of rising cryptocurrency crimes. In 2021 alone, scammers took $14 billion worth of crypto, according to a recent report from blockchain data firm Chainalysis.
PayPal considers launching stablecoin
PayPal may launch its own stablecoin as it grows its footprint in the crypto sector, CoinDesk reported. A PayPal spokesman told CoinDesk in an emailed statement that the company is “exploring a stablecoin,” and will work closely with regulators if they move forward with the idea. PayPal has been actively growing its crypto business recently, increasing the amount of crypto its customers can purchase, as well as investing in educating its users on crypto and working to allow them to withdraw their crypto safely to third-party wallets.
Binance CEO has $100 billion net worth
Changpeng “CZ” Zhao, CEO of crypto exchange Binance, has an estimated net worth of nearly $100 billion, according to new calculations from the Bloomberg Billionaires Index published. In terms of wealth, that puts him in the company of Facebook founder Mark Zuckerberg and Google founders Larry Page and Sergey Brin. The Binance coin makes up the “majority” of his net worth, according to an interview with the Associated Press last November.
Scammers stole $14 billion worth of crypto in 2021
Scammers took a record $14 billion worth of cryptocurrency in 2021, up from $7.8 billion in 2020, according to blockchain data firm Chainalysis’ 2021 “Crypto Crime Report.” While that’s a big jump in criminal crypto activity, the widespread adoption of crypto by legitimate individuals and institutions actually pushed the total percentage of illicit cryptocurrency transaction volume as low as it’s ever been, the report says.
Crypto becomes legal in Ukraine
Ukrainian President Volodymyr Zelenskyy signed into law a bill that legalizes crypto in the country, Bloomberg reported. This move by Zelenskyy comes amid a sudden increase of crypto donations to support the country’s defense against a Russian invasion. Along with conventional military aid, Ukraine has received more than $60 million in crypto donations since the war started, according to research from blockchain analytics firm Elliptic.
U.S. Labor Dept warns about crypto investments in 401(k) plans
The U.S. Department of Labor recently warned employers that offer 401(k) plans with cryptocurrency investment options, such as Bitcoin and other digital assets like non-fungible tokens, to “exercise extreme care.” According to the labor agency, it has become aware of financial services companies marketing crypto investments as retirement-plan options in recent months, and “has serious concerns.” The agency said crypto investments present “significant risks and challenges” to 401(k) investors, including fraud, theft, and financial loss.
Japan asks crypto exchanges to stop Russian transactions
The Japanese government asked crypto exchanges earlier this week to stop transactions with Russian and Belarusian organizations and individuals sanctioned following Russia’s invasion of Ukraine, Reuters reported. The move by Japan came after the Group of Seven leaders — which includes Canada, France, Germany, Italy, Japan, United Kingdom, and the United States — came to an agreement together that Russia could not leverage digital assets as a means of evading sanctions. According to the report, crypto exchanges who don’t comply could be fined as much as 1 million yen, which is equivalent to roughly $8,500, and executives could face up to three years in prison.
Ethereum burns $6 million worth of its own coin
Ethereum is intentionally destroying a portion of its own coin supply. The platform has cut down on 65% of the new issuance of its currency since last August, according to Watch the Burn, an Ethereum data dashboard. That’s nearly $6 billion worth of Ether burnt, destroyed, and taken out of circulation. It’s part of a multifaceted strategy to upgrade the blockchain network to its Consensus Layer, previously known as Ethereum 2.0, while also reducing the amount of money that crypto miners can make from each transaction.
Crypto investor Katie Haun raises $1.5 billion
Crypto investor Katie Haun raised $1.5 billion for her newly launched, crypto-focused venture firm. It’s the largest initial fund ever raised by a solo venture capitalist, let alone by a solo female VC, according to Pitchbook. The move also reflects surging investor interest in Web3, which is typically described as the next iteration of the internet based on blockchain technology.
Goldman Sachs makes first OTC crypto transaction
Goldman Sachs made the first over-the-counter crypto transaction by a major bank in the U.S. The bank traded a Bitcoin non-deliverable option, a derivative tied to Bitcoin’s price that pays out in cash, with crypto bank Galaxy Digital this week, according to a press release. It’s a big step in the development of crypto markets for institutional investors.
New SEC crypto initiatives
The Securities and Exchange Commission (SEC) Chairman Gary Gensler announced several initiatives to expand investor protections in the crypto market, including registering and regulating crypto exchanges, possibly separating out asset custody, and partnering with the Commodity Futures Trading Commission to address platforms trading crypto-based security tokens and commodity tokens.
United Kingdom NFT
The United Kingdom announced it will launch its own NFT, or non-fungible token, in effort to the lead the way in cryptocurrencies. U.K. Finance Minister Rishi Sunak has asked the Royal Mint to create and issue the NFT by the summer, according to a U.K. government press release. NFTs broke through into the mainstream in 2021, and have explored in popularity. Total NFT sales hit $25 billion in 2021, compared to $94.9 million the year before, according to data collected by DappRadar, an app store for decentralized applications.
Terra adds $100M AVAX to its UST
Terraform Labs, which created the crypto tokens LUNA and stablecoin TerraUSD (UST), announced it added $100 million worth of Avalanche (AVAX) to its UST stablecoin reserve. Avalanche, a blockchain that completes with Ethereum, is the second major asset added to the UST reserve after Bitcoin. In an interview with Bloomberg, Terraform Labs founder Do Kwon explained that they chose Avalanche over Ethereum due to its “rapid growth and vast fan base.”
$600M Axie Infinity hack
Ronin Network recently lost roughly $615 million in Ethereum and USD Coin to hackers, according to a blog post. It is the largest decentralized finance, or DeFi, hack to date as it surpasses the $611 million hack of the DeFi protocol Poly Network in August 2021. Ronin Network powers the popular blockchain game Axie Infinity, which lets users earn money as they play.