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What 2022 may hold in store for the cryptocurrency investor

The first week of 2022 was not favorable for bitcoin, as the cryptocurrency lost 11% of its value in a matter of days and finished this week at around $ 42,000, down almost 40% from its all-time high last fall.

Analysts closely watching crypto said the Federal Reserve’s hint of an earlier-than-expected interest rate hike has prompted many investors to sell off their bitcoin holdings and turn to safer investments. Other digital coins, notably Ethereum and Ripple, also plunged this week, down 13.5% and 9%, respectively.

This is in line with the evolution of the ultra-volatile crypto market, with investors expecting the large swings to continue into 2022.

“It’s part of the game,” Ryan Firth, financial planner at Mercer Street Financial, told CBS MoneyWatch. “You have to hang on and come in with your eyes wide open. You could see 80% drops in a matter of months. “

Millions of dollars of Bitcoin buried


For investors, 2021 marked a busy year for cryptocurrency. Bitcoin saw its price hit $ 69,000 in November, while Ethereum hit a record high of $ 4,404 in October.

As a sign of the growing importance of crypto, a number of retailers have started to accept change as payments. Some athletes and politicians started receive part of his salary in crypto, while Wall Street has created exchange-traded funds around crypto futures.

As the price of bitcoin, ethereum, and others skyrocketed, crypto companies have taken dramatic action. Coinbase went public on the Nasdaq last April and ran an ad featuring Hollywood star Matt Damon.

In perhaps the biggest move yet, the crypto world has topped 2021 with purchasing the naming rights to Staples Center in Los Angeles and renaming the sports stadium to Arena as part of a $ 700 million deal.

“We will see even more crypto companies going public in 2022 than in 2021 and several of them will have valuations of over $ 5 billion,” blockchain analyst firm Arcane Research predicted in a note. of research.

Arcane also seems more crypto ETFs on the horizon, giving investors a way to test the waters while limiting the downsides.

Don’t look down

Yet investing in digital currency “is not for the faint of heart,” warned Firth, who invests in crypto personally while advising clients not to invest more than 5% of their portfolio in such a volatile asset. . Some days an investor will see huge gains, but “you still have to prepare for that sudden drop of over 50% in about a week,” he said.

Andrea Hardison, a project manager for a technology consultancy in Nashville, said she expects huge swings in crypto prices in 2022, just like last year. But Hardison, who started buying crypto last April, still plans to keep investing more money in hexes, bitcoins, solana and ethereum, noting that some of his bets have already doubled in value.

Robert White III, a social worker in charge of workforce development in St. Louis, is also not fazed by the roller coaster crypto market. White, a bitcoin owner, said he plans to withdraw some of his paychecks directly to buy cryptocurrency.

“My approach will be consistent and stable,” said White, who bought his first bitcoin in 2017 when it sold for $ 1,100. “I’m hoping for three times the growth of what I invested, but crypto is so volatile it can take so many different ways in a day.”