The White House is planning a report on cryptocurrency regulation

The White House is planning a report on cryptocurrency regulation, and new investors have put $14 million into the market. In the midst of the downturn, Twitter ventures into non-financial trading (NFTs).

Last week, the crypto market experienced its worst week in months and it seems that the trend is continuing this week too.

On Monday morning, Bitcoin dipped below $34,000, in comparison to its November peak of about $69,000. On the same morning, Ethereum plummeted below $2,200, even though both are showing signs of improvements this week, only to be halted late Wednesday. This followed an announcement by the Federal Reserve Chairman Jerome Powell that the Fed might begin increasing rates in March to tackle growing inflation.

The significant fall in prices follows the stock market’s worst week in a period of about 2 years and the Federal Reserve’s long-awaited report regarding potential government-issued digital currency. Based on a report by CoinMarketCap data, the crypto market cap dipped below $2 trillion during the sell-off.

Experts believe that the U.S. Federal Reserve’s intentions of wanting to withdraw assistance from the economy while increasing the rates are the catalyst. “Many investors are removing risk from their portfolios at the moment. It could be the sign of a new market cycle,” says Grant Maddox who is a certified financial planner and founder of South Carolina-based Hampton Park Financial Planning. “Long-term investors should set an allocation that fits their risk tolerance and use this for their ‘safe money.’”

Meanwhile, according to an article by Bloomberg, the White House is positioning itself at the core of efforts by Washington to regulate cryptos. During the initial drop seen last week, investors had already invested $14 million into crypto funds. NFT verification services are now available to Twitter Blue service subscribers that get to pay $3 per month. In addition, the Federal Reserve took the first step toward the possibility of creating digital currency in the U.S.

The following is more on the latest news about the cryptocurrency that investors need to be aware of:

• Both Ethereum and Bitcoin witnessed sharp declines that began on Thursday and continued all weekend up to Monday morning, with Bitcoin falling below $34,000 and Ethereum going down by $2,200. It’s the second time that two of the biggest cryptos have now dipped below these benchmark price marks for the second time this month. They hadn’t been this low since July, though both were on recovery by Tuesday morning, with Bitcoin above $36,000 and Ethereum by $2,400.
• According to a report by Bloomberg, the White House is expected to issue an initial government-wide policy for crypto, along with other digital assets as early as next month, and will go ahead to ask federal agencies to make an analysis of their prospects and dangers. Bloomberg further reports that several senior administration officials are holding a number of meetings and preparing an executive order expected to be presented to President Joe Biden in the weeks to come. Based on the story, the Biden team is under pressure to ensure that they take the lead on the issues since government agencies seem to have adopted a disjointed approach so far.
• Based on a report released by CoinShares on Monday, almost $14 million in fresh investor money came into cryptocurrency funds in the ending weeks of January 21. The same report said that investors were all taking advantage of the price drop since the inflows started arriving in the week “during a period of significant price weakness.” According to the data, Bitcoin-focused funds did bring in $13.8 million.
• Some of the largest tech firms are continuing to investigate and subsequently use NFT technology in their offerings. Twitter, for instance, was the first major social media platform to implement NFT-based profile images last week, though there are some restrictions here. For instance, to have an NFT profile image, one must first have purchased or minted an NFT on some Ethereum-based exchange. And to put an NFT as your profile image that shows in a hexagonal shape, you’ll need a Twitter Blue subscription and an iOS device.
• The Federal Reserve recently released a long-awaited analysis on the drawbacks and benefits of government-issued cryptos, though it didn’t take a position regarding the issue. However, they are looking for input from the general population regarding the launch of a digital dollar until May 20, 2022. A central bank digital currency (CBDC) is a digital form of cash issued and backed by the US’s central bank. However, the U.S. isn’t the only country thinking of starting a CBDC. It’s being tested by many other central banks around the world, from Sweden to China.

Bitcoin remains one of the most valuable cryptocurrencies in terms of market capitalization, and serves as an important barometer for the crypto market as a whole, with other coins such as Ethereum –and smaller altcoins- seemingly following its lead. While Bitcoin recently reached a new all-time high, it was a rather typical uptick for the cryptocurrency, which is widely known for its volatility. But that isn’t to mean that investors have to ignore swings in their directions. In fact, experts highly recommend not making any major changes in investment based on regular variations.

Since cryptos are still in their infancy stages, anything from innovation to regulation can have a significant impact on investors. You need to invest wisely, regardless of what you see in the news or the price of Bitcoin.

What you need to know about investing in crypto

First, you need to note that cryptocurrency is a high-risk and at the same time a high-rewarding investment. You need to invest only where you’re willing to lose in cryptos while making sure that you’ve taken care of your other financial goals. Set funds aside meant for an emergency, contribute to retirement savings, and pay off any high-interest loan balances that you may have.

How Should Investors Handle Volatility?

Volatility in cryptos isn’t anything new, and you need to be prepared for it should you decide to invest in them.

According to Ollie Leech, learn editor at Coindesk, a cryptocurrency news outlet, volatility can be linked to an “immature market.” A tweet from a celebrity to a new federal law might cause prices to skyrocket. “If Elon Musk puts hashtag Bitcoin in his Twitter bio, it sends Bitcoin up 10%,” says Leech.

Because of this uncertainty, investing experts advise avoiding putting a large portion of your portfolio into a risky asset such as cryptos. Investing experts further advise that you keep your crypto holdings to less than 5% of the entire portfolio.

For inexperienced investors, day-to-day volatility can seem somewhat unsettling. But on the other hand, dips are nothing to be concerned about if you’ve invested using the buy-and-hold approach. That’s according to Humphrey Yang, the personal financial guru at Humphrey Talks. Yang has a simple solution: don’t think about your money.

“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.

Many conventional long-term investors follow the traditional “set it and forget it” advice. You may have too much riding on your crypto investments if you can’t get on board and the dramatic dips continue to bother you.

“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 Bona 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,” further adds Boneparth.