The hits keep coming for Bitcoin (BTC-USD).
Remember when experts started suggesting that Bitcoin, the granddaddy of cryptocurrency, could hit $100,000 by the end of the year? When the sky was the limit for BTC-USD?
Remember when Elon Musk had Tesla (NASDAQ:TSLA) buy $1.5 billion in Bitcoin and people thought it would be another legendary move?
None of those were that long ago, but it may seem like forever if you’ve been watching your cryptocurrency holdings vanish before your eyes. Bitcoin slid this week to less than $26,000 for a short time. It’s down nearly 40% so far this year, including a drop of 26% just in the last month.
Bitcoin was valued at about $34,700 when Tesla made its investment. Now those coins are worth just over $1 billion – Tesla lost almost $500 million on that deal so far.
Across the board, cryptos are hemorrhaging. Cyber coins lost a total of more than $200 billion in market value just on May 11 alone.
There’s plenty of reasons why this is happening. Inflation of more than 8% has everyone worried. The Federal Reserve is raising interest rates in an effort to bring inflation down, but it’s going to take some time.
On top of that, the stablecoin Terra USD (UST-USD) utterly collapsed, losing more than 60% of its value this week. Terra is supposed to follow the value of the U.S. dollar, but now can be bought for less than 40 cents. When it collapsed, a lot of other cryptos fell along with it.
The Terra collapse and the losses that investors are taking now on cryptocurrencies will restart a lot of discussion in financial circles about whether cryptocurrencies should be regulated. That discussion alone will also create some headwinds for BTC-USD.
So, what do you do now with your Bitcoin?
Obviously, this is going to continue to be incredibly volatile period for cryptocurrencies. But it’s also hard to resist the idea of buying into BTC at prices less than $30,000 – something that just a few weeks ago seemed unlikely.
I don’t have any intention of selling my BTC-USD anytime soon. But for investors with a low risk tolerance, I don’t blame you at all for looking at other options for your money.
On the date of publication, Patrick Sanders had long positions in BTC-USD and TSLA. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
