What investors need to know as bitcoin drops 50% from its all-time high

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The sell-off in the cryptocurrency market continues on Monday, with the overall value down $130 billion in the past 24 hours alone.

Bitcoin fell below $34,000 on Monday morning and is currently trading at around $36,011, according to data from Coin Metrics. Ether is also falling, now priced at around $2,373. The two major cryptocurrencies by market value have fallen around 50% from their all-time highs in November, when bitcoin hit around $69,000 and ether hit $4,878 in a rally on the 10th. November.

This is a possible response to a few factors, including the Federal Reserve’s December meeting, where the central bank indicated it may begin to shrink its balance sheet, reverse its support for monetary policy and possibly increase interest rates.

While the current drop may be shocking, this volatility is not unusual for the cryptocurrency market.

“Long downturns like this are normal with crypto,” Tyrone Ross, CEO of Onramp Invest, which provides crypto asset management technology to financial advisors, told CNBC Make It. “People need to know that, and if you can afford it, you should work with an advisor to guide you through these markets.”

“Don’t watch every tick of the price”

At times like these, “don’t watch every tick of the price,” says Ross. “Zoom out and look at how crypto has performed over the past year or two.”

Although cryptocurrency is considered a risky and speculative investment, if you already own it or are considering buying it, experts agree that a buy and hold strategy is generally the best practice. Rather than attempting to trade in the short term, this strategy favors holding an asset for the long term and riding out the ups and downs.

Anjali Jariwala, Certified Financial Planner, Chartered Accountant, and Founder of Fit Advisors, recommends holding bitcoin for at least 10 years. “If you are committed to a strategy that involves crypto, you need to be comfortable holding the investment for a longer-term approach and trying to resist the urge to sell when prices drop,” says- she.

Don’t let fear dictate your investment strategy. “Like any investment, discipline is key,” says Jariwala.

“If you bought crypto as something to invest in over the next 10 years, now is the time to remember that,” says Douglas Boneparth, Certified Financial Planner and President of Bone Fide Wealth. He has been investing in bitcoin since 2014.

Although it’s easier said than done, “take a deep breath if you’re feeling nervous or scared,” says Boneparth. “It’s better to focus on things you can control than things you can’t, like the price of a particular investment.”

Review your investment strategy

Now could also be a good time to review your investment strategy, says Ross.

To get started, he suggests asking yourself the following types of questions:

Why did you buy in the first place? Do you have the same feeling now that it’s down about 50%? What is your broader financial goal with crypto, and does this downturn affect that? Is your personal financial situation still secure?

With riskier assets like cryptocurrency, experts recommend limiting your portfolio allocation. So, in the event of a slowdown, you will not lose everything.

Only invest what you can afford to lose

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