- The Federal Reserve announced to fight inflation without larger rate hikes.
- Bitcoin increased by 5.20% after the Federal Reserve announcement but recently dropped by 7.90% to 35,571.90.
- Crypto experts theorize the reason behind the crash.
Bitcoin’s price dropped by 7.90% to $35,571.90 on Thursday afternoon, erasing Wednesday’s gains of 5.20% to $40,023.10 after the Federal Reserve announced it would fight inflation without larger rate hikes.
According to Bill Noble, Chief Technical Analyst at Token Metrics, some of the drops were caused by a combination of factors. Noble theorizes it could be excitement from low-quality coins, negative comments from Elon Musk, or China’s recent crackdown on crypto services.
Likewise, the recent price fluctuation has followed surging inflation, ongoing uncertainty over the country’s lingering fight with COVID-19, and new regulatory actions by the US government including Biden’s recent executive order.
More generally, new short-term investors who are selling their holdings in response to the latest decline may be contributing to the drop in Bitcoin’s value according to a report from Glassnode Insights – a blockchain analysis firm.
Notably, Bitcoin has been trading in a tight range for several weeks now, primarily soaring between $36,000 and $42,000. Kiana Danial, crypto expert and founder of Invest Diva, recently said on TikTok that Bitcoin could find “medium-term support” between $31,000 and $37,000.
However, experts advise keeping cryptocurrency investments to under 5% of an individual’s portfolio.
On the other hand, potential investors looking to buy the dip should understand the fluctuations and be ready for this kind of volatility moving forward. Even if they invest now, with prices relatively low, they should be prepared for prices to drop even more.
Again, investors are advised to only put in what they can afford to lose — after covering other financial priorities like emergency savings and more traditional retirement funds.
Disclaimer: The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of CoinQuora. No information in this article should be interpreted as investment advice. CoinQuora encourages all users to do their own research before investing in cryptocurrencies.