Crypto prices continued to drop this weekend, wiping over $200 billion off the total market cap in just a few days. The crypto market initially made a surprise rally in response to what was the Fed’s biggest rate hike since 2000. However, that optimism didn’t last and Bitcoin (BTC) is now close to its lowest price this year.
Top cryptocurrencies are plummeting
Market leader Bitcoin is currently trading almost 9% down in the past seven days and 30% lower than it was at the start of the year. Ethereum (ETH) and BNB (BNB) have seen similar losses, according to CoinMarketCap data. Solana (SOL), one of last year’s top performers, is down 13% on the week and almost 60% year to date.
The sharp drop in crypto prices comes as central banks around the world take steps to curb inflation. In the U.S., the Federal Reserve is increasingly hawkish and Chairman Jerome Powell said additional rate hikes are likely in the coming months. Economic tightening measures have caused people to pull out of high-risk assets like crypto. This, combined with geopolitical uncertainty caused by Russia’s invasion of Ukraine, means cryptocurrencies are struggling.
Will the crypto crash continue?
Nobody has a crystal ball and it is difficult to know how much further crypto prices will fall. In addition to the economic pressures, there are a number of other factors — including increased regulation — that could push prices down further. One thing’s for sure: We’re not in the same economic climate that drove astronomical price gains last year.
In the short term, analysts such as chartist Peter Brandt think Bitcoin could fall as low as $28,000. Given it is worth around $34,500 right now, that would involve a further drop of 18%. Brandt’s analysis has more weight as he predicted the last crypto crash in 2018. A further drop of this size would undoubtedly be difficult for some investors to stomach, but what really matters is the long-term outlook for the crypto king.
In the long term, some believe Bitcoin could become the digital currency of the future. Others see it as a type of digital gold. Still, others believe its price could fall to zero. This means you’ll find long-term crypto price predictions of everything from $0 to $1 million from a host of financial gurus. Many experts believe BTC will reach $100,000 in the medium term.
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Ways to avoid panic selling
As an investor, it isn’t easy to watch the value of your crypto portfolio slump. This is even more the case for many newer crypto holders out there. Experienced crypto holders have lived through crypto crashes before, but this may be a new ordeal for those who first bought crypto last year.
If you’re tempted to cut your losses and sell your crypto investments today, bear in mind it’s almost impossible to call the bottom. For all the dire price predictions, there’s a chance Bitcoin could rally tomorrow. If you sell now, you’ll lock in any losses and won’t be able to benefit from subsequent gains. This is the chief reason people often regret panic selling — they end up buying high and selling low.
One key way to avoid panic selling is to only invest money you can afford to lose. We’re talking about an asset that could go sky high, but could also crash completely. If you limit your investments to cash you don’t need, you’ll reap the rewards if prices soar but a crypto crash won’t derail your finances.
It’s also useful to keep a long-term perspective. Just five years ago, Bitcoin was worth around $1,700 — it’s grown almost 2,000% since then. That doesn’t mean we can expect another increase of that magnitude. But it is a good reminder that so far, buy-and-hold investors have seen big gains. Remind yourself of why you originally bought crypto and ask yourself whether that reasoning still stands. If it does, it is easier to hold even through drastic price slumps.
