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The price of Bitcoin jumped over $40,000 Monday, the highest it’s been since June 16. At the same time, Amazon may have dropped a hint that expansion into cryptocurrency is on the horizon.
Plus, crypto regulation was back in the news with a statement from the U.S. Treasury Department and proposed new cryptocurrency regulation from the European Union. Fresh comments from Tesla CEO Elon Musk also coincided with a brief rise in value for Bitcoin and Ethereum before Bitcoin’s run up to $40,000 over the weekend.
Here’s a rundown of the latest big crypto news:
- Bitcoin rose above $40,000 Monday, reversing its downward trend since falling from an April high of more than $60,000. But volatility is par for the crypto course, so investors still shouldn’t change their strategy based on this latest increase.
- American lawmakers continue to talk about new cryptocurrency innovation and regulations. The Senate Committee on Banking, Housing, and Urban Affairs on Tuesday held a hearing titled “Cryptocurrencies: What are they good for?” while the House Subcommittee on National Security, International Development, and Monetary Policy held a simultaneous hearing on “The Promises and Perils of Central Bank Digital Currencies.” Both committees gathered witnesses from across the cryptocurrency space to discuss ransomware and cybersecurity attacks, the potential creation of a U.S. central bank digital currency (CBDC), the need for regulation, effects on financial services industries, and more.
- Amazon posted a job description looking for an expert in the field of digital currency and blockchain technology to “innovate on behalf of customers within the financial systems of one of the largest e-commerce companies in the world”. Amazon itself has neither confirmed nor denied any movements in the cryptocurrency space.
- The European Union proposed regulation of private cryptocurrency transactions to try and stop crypto crime. “The aim of this package is to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system,” the statement said.
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 crossed the $40,000 threshold, it was a pretty normal swing for the crypto, which has also seen a more than 50% decrease in value in past months. 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.
The cryptocurrency space 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.”
Other Recent Crypto News
- Elon Musk revealed that privately-held SpaceX holds Bitcoin, and that Tesla is likely to resume accepting the cryptocurrency as a payment method for its electric vehicles. Musk talked extensively about his crypto holdings — of Bitcoin, Ethereum, and Dogecoin — at The B Word conference last week. Musk spoke alongside Twitter and Square CEO Jack Dorsey, and ARK Invest CEO Cathie Wood for a panel discussion on the future of Bitcoin. Bitcoin and Ethereum both saw brief price increases as Musk, Dorsey, and Wood discussed broader institutional adoption of cryptocurrency.
- Treasury secretary Janet Yellen urged U.S. policy-makers to instate regulation for stablecoins, according to a statement from the Treasury department. Yellen’s statement echoes sentiments from Federal Reserve Chair Jerome Powell, who voiced his concerns earlier this month about a lack of stablecoin regulation.
- The Federal Reserve Chairman says U.S. might need more crypto regulation, but long-term HODLers of big coins like Ethereum and Bitcoin probably don’t need to worry about changing their strategy, experts say.
- Major cryptocurrency exchange Binance is no longer authorized to operate in Italy, according to a statement from Italian regulators. The move shows how easily new national regulations can impact current cryptocurrency infrastructure.