What the Falling Bitcoin Price Teaches Crypto Investors

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If you want to invest in Bitcoin, Ethereum, or any virtual currency, you have to be ready to deal with significant price decreases in the cryptocurrency market.

A single Bitcoin was trading for $33,000 as of Monday morning. Those figures represent a six-month low and a 50% drop from November’s peak of $68,000.

Ether’s second-largest cryptocurrency by market value has fallen to about $2,200, compared to its November peak of $4,800. Over the previous several days, the importance of many other currencies and tokens has fallen substantially.

Bankruptcy Code and Cryptocurrency

When Congress adopted the first Bankruptcy Code in 1978, it became an instant classic. It was among the strongest and most solid legislations that exist in the United States. For bankruptcy professionals this is often an example of clarity. People are aware of how to use the Code to traditional companies and assets. Yet, despite the genius in the Bankruptcy Code, Congress could have not anticipated the growth of cryptocurrency. There are many obvious areas in that Bankruptcy Code should apply to cryptocurrency, however, upon close examination, the Code is not a good match for a cryptocurrency such as Bitcoin. 

When you file for bankruptcy Bitcoin can raise a range of issues that are of the first impression. Is it truly an actual currency? Is it an asset that is personal property? How do you properly declare an intangible asset exempt when its value is changed by a second? Who will benefit from the cryptocurrency appreciation post-petition either creditors or estates? If the cryptocurrency is liquidated to fund a program when is it appropriate to convert cryptocurrency into USD for the greatest benefits it offers creditors? It is unclear. The Internal Revenue Service and U.S. Securities and Exchange Commission (“SEC”) have provided some explanations, but BKHQ at Minnesota lawyers and judges have to find out what to do with this Bankruptcy Code to cryptocurrencies like Bitcoin and the companies that were created to help assist these.

If you’re new to crypto trading or even an experienced investor, the volatility of the crypto market might be a little unnerving.

Three things to keep in mind.

1. Prices of other assets are also plummeting, not only those in cryptocurrencies.

In the broader market sell-off, the Bitcoin crisis serves as a warning. It’s been a dismal start for meme stocks and tech companies alike. There is a significant drop in GameStop’s stock price, and the Nasdaq Composite’s tech-heavy market index from their record closes in November to the beginning of 2022.

A significant stock market benchmark known as the S&P 500 had its worst week since March 2020 last week.

As a result of the Federal Reserve’s remarks that it may increase interest rates sooner than previously expected, Wall Street has beaten.

2. Cryptocurrency prices are likely to fluctuate.

Even in such precipitous losses, Bitcoin, Ether, and other cryptocurrencies are no strangers to volatility. Between April and July of last year, Bitcoin saw a 50% decline in value before reaching an all-time high of $68,000 in November of that year.

We’ve also seen how little factors like Tesla CEO Elon Musk’s comments can send crypto values surging, as we saw with Dogecoin and Bitcoin.

Altruist head of investing Adam Grealish tells Money via email that “Bitcoin investors should anticipate this type of volatility.” It’s not rare for the asset to have 50 percent, 70 percent, and 80 percent drawdowns.

As Bitcoin becomes more broadly accepted, we may anticipate it to become less volatile, but we aren’t there yet.

So, keep in mind that the crypto market has seen dramatic price movements in the past, and it’s likely to see more of the same in the future.

3. Don’t let your portfolio be smashed.

Investing in cryptocurrency is a dangerous endeavor because of its volatile nature, so you should keep it to a minimum in your portfolio. Bitcoin and other cryptocurrencies are often recommended to be no more than 5% of your whole portfolio by financial consultants.

Plan to keep your Bitcoin for a long time rather than selling it when the price decreases and you’re concerned about it if you have a modest quantity of money to invest. Anjali Jariwala, a licensed financial adviser and the founder of FIT Advisors, recently shared her thoughts on the matter with Money.com.

She continued, “You have to be okay with the money possibly disappearing.”

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