Bitcoin holds around $ 40,000, why did BTC drop recently and should you still invest in it?

What happened ?

After a decent rally in recent months, the cryptocurrency market is emerging from a tough weekend as macro concerns continue to instill fear in the broader market.

In the past 24 hours, the world’s largest cryptocurrency, bitcoin (BTC -0.31%), was trading down by more than 5% at 12:00 in France (GMT + 2). The price of the second largest cryptocurrency in the world, Ethereum (0.87% ETH), was trading down nearly 7.6%.

Markets slid early Tuesday morning before rebounding as investors battled rising inflation, geopolitical crises and potential Federal Reserve tightening of monetary policy. The cryptocurrency market has increasingly followed the stock market in recent months, making it even more intertwined with global economic factors, such as those stemming from the Russian war in Ukraine. Minutes from last week’s March Fed meeting showed its intention to cut its balance sheet by $ 95 billion each month to fight inflation. The March Consumer Price Index, which measures changes in the cost of food, housing, gasoline, utilities, and other goods, rose 8.5 percent from the prior month of the prior year, the largest increase of inflation since 1981.

# Inflation is worse than you think and Bitcoin is better than you know. : Michael Saylor

Bitcoin had stagnated below $ 40,000 after its price jumped 10% above $ 42,000 following President Joe Biden’s March 9 signing of a large cryptocurrency executive order, which he asks. government agencies to create a cryptocurrency regulation plan and to consider a digital currency issued by the central bank. These are the first concrete steps taken by the White House to regulate cryptocurrencies, which have emerged as a key part of the war in Ukraine and continue to drive further volatility in the crypto and equity markets.

What Investors Need to Know!

Macro headwinds will continue to impact the broader cryptocurrency market. Especially with inflation this high and the Fed likely withdrawing money from the market, there may be less room and appetite for the speculative cryptocurrency market.

That said, cryptocurrencies have made their way into the traditional financial system and around the world, so one should continue to consider the more influential and useful cryptocurrencies like Bitcoin and Ethereum as a long-term buy-in.

When it comes to meme-inspired currencies like Dogecoin, but with influencers like Elon Musk behind it and an already large market cap, you never know.

If you invest in cryptocurrencies, expect the volatility to continue. This is why experts recommend keeping your cryptocurrency investments at less than 5% of your total portfolio.

Just as you shouldn’t let a drop in prices affect your decision to buy cryptocurrencies, don’t let a sudden rise in prices change your long-term investment strategy. More importantly, don’t start buying more cryptocurrencies just because the price goes up. Always make sure your financial foundations are covered, from your retirement accounts to your emergency savings, before investing additional funds in a speculative business.

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