White House Plans Report on Crypto Regulation, New Investors Put $14M Into Crypto Market Amid Downturn, Twitter Gets Into NFTs

Last week was the crypto market’s worst stretch in months, and it continued to tumble on Monday. 

Bitcoin fell below $34,000 Monday morning, compared with an all-time high of nearly $69,000 in November. 

Ethereum fell below $2,200 Monday morning. 

The significant price drops come amid the stock market’s worst week in nearly two years, and after the release of the Federal Reserve’s long-awaited report on a possible government-issued digital currency. 

The crypto market cap fell below $2 trillion amid the sell-off, according to CoinMarketCap data. 

Some experts say the catalyst is the U.S. Federal Reserve and its plans to pull back stimulus from the economy and raise interest rates. 

“Many investors are removing risk from their portfolios at the moment. It could be the sign of a new market cycle,” says Grant Maddox, a certified financial planner and founder of Hampton Park Financial Planning based in South Carolina. 

“Long-term investors should set an allocation that fits their risk tolerance and use this for their ‘safe money.’”

Meanwhile, the White House is placing itself at the center of Washington’s efforts to regulate cryptocurrencies, according to a Bloomberg report. 

Investors put $14 million into crypto funds last week during the initial dip. 

Twitter rolled out NFT verification services to those who pay $3 a month for its Twitter Blue service. 

And the Federal Reserve took its first step toward possibly issuing a U.S. digital currency. 

Here’s more on the latest crypto news investors should know about:

• Bitcoin and Ethereum both saw sudden big drops that started last Thursday and carried through the weekend and into Monday morning, with Bitcoin dropping below $34,000 and Ethereum dropping below $2,200. This is the second time this month that the two biggest cryptos have dropped below these benchmark price points, after initially doing it on Jan. 10. They hadn’t been this low since July, though both had recovered some of the losses by late Monday.
• Bloomberg reported the White House is planning to release an initial government-wide strategy for crypto and other digital assets as soon as next month, and will ask federal agencies to assess their risks and opportunities. Bloomberg cited people familiar with the matter, saying senior administration officials are holding several meetings and drafting an executive order that will be presented to President Joe Biden in the coming weeks. The report suggests the Biden team is facing pressure to take the lead on the issue since federal agencies have so far taken a scattered approach.
• Around $14 million of new investor money flowed into cryptocurrency funds for the week ending on Jan. 21, according to a CoinShares report Monday. The report suggests that investors were taking advantage of the price dip as the inflows mostly came later in the week “during a period of significant price weakness.” Last week’s inflows were led by Bitcoin-focused funds, which brought in $13.8 million, the report shows. 
• Large tech companies continue to explore and integrate NFT technology into their services. Last week, Twitter became the first major social media platform to introduce NFT-based profile pictures. This new feature comes with limitations, however. To have a NFT profile picture, you’ll need to have bought or minted an NFT on an Etherum-based marketplace first.  You also need a Twitter Blue subscription, and an iOS device to set an NFT as your profile picture, which appears in a hexagonal shape. A lot of people, including Elon Musk, have taken to Twitter to express their frustrations with the new feature. In a tweet Musk said, “Twitter is spending engineering resources on this bs while crypto scammers are throwing a spambot block party in every thread!?”
• The Fed released a long-awaited report exploring the pros and cons of government-issued crypto, but ultimately took no position on the matter. Instead, they’re asking the public to weigh in. Through May 20, 2022, the Fed is asking Americans to provide public comment on the possible rollout of a digital dollar. A central bank digital currency (CBDC) would essentially be a digital form of cash, issued and backed by America’s central bank. The U.S. isn’t the only country exploring or launching its own CBDC. Central banks all over the world, from China to Sweden, are experimenting with the adoption of digital currencies.

Bitcoin is the largest cryptocurrency by market cap, and a good indicator of the crypto market in general, since other coins like Ethereum (and smaller altcoins) tend to follow its trends. Even though Bitcoin recently set another new all-time high, it was a pretty normal uptick for the crypto, which is notorious for its volatility. That’s not to say investors should take swings in either direction lightly, and this is also why investing experts recommend not making any major investment changes based on these normal fluctuations.

Cryptocurrency is still very new, and everything from innovation to regulation can have outsize impact for investors. Here’s how you can invest smartly, regardless of what’s making news or Bitcoin’s price swings.

Source: time.com