Bear case for crypto

A key investment case for bitcoin is deteriorating as geopolitical uncertainty and rising inflation hammer cryptocurrency prices. The price of bitcoin fell to a two-week low Tuesday after Russian President Vladimir Putin ordered troops into Donetsk and Luhansk, two breakaway regions in eastern Ukraine, shortly after declaring them as independent.

Bitcoin is often referred to as "digital gold" by its backers. The term refers to the idea that bitcoin can provide a store of value similar to gold — one that's uncorrelated with other financial markets, like stocks. Bitcoin bulls also see the cryptocurrency as a "safe haven" asset that can serve as a hedge against global economic uncertainty and increasing prices, which reduce the purchasing power of sovereign currencies like the U.

With inflation at historic highs, you'd expect this would be bitcoin's time to shine — U. That's led analysts to question whether its status as a form of "digital gold" still rings true. Experts say cryptocurrencies have become more closely linked to other speculative parts of the market such as tech stocks, which are falling due to fears that lofty valuations may come down as the Federal Reserve and other central banks begin to hike interest rates and wind down their huge stimulus packages.

In fact, gold has actually been outperforming bitcoin lately. Bitcoin's slump has resulted in increased talk about a prolonged bear market known as " crypto winter. Not all analysts are convinced the latest downturn in digital currency prices is indicative of a crypto winter, though, with many saying market conditions have changed. There are now plenty of institutions holding bitcoin which, according to experts, is one reason for why it's become more closely correlated with stocks.

However, he added: "This relationship has the potential to be broken at any time given the different fundamentals for each market. It's extremely tempting to try to cut your losses when faced with huge price drops. But if you do, you won't benefit when prices start to increase again. Moreover, selling after a huge drop flies in the face of the oldest rules of investment: buy low and sell high.

Granted, this is easier said than done as it can be hard to time the market. But selling at a loss will lock in your losses. Take a deep breath and remind yourself of why you invested in cryptocurrencies in the first place. Perhaps you believe blockchain technology can transform the way we manage money -- or that Web 3 will be the next generation of the internet. Look at why prices have fallen, and ask yourself whether your original investment thesis still holds true.

If so, now is not the time to sell. Another way to keep this latest drop in perspective is to focus on your long-term objectives. Cryptocurrency is volatile and we've seen drops like this before -- and we'll likely see them again. But if you invest with a five- to year horizon, it's much easier to hold when times are turbulent. In fact, you've probably used this company's technology in the past few days, even if you've never had an account or even heard of the company before.

That's how prevalent it's become. Sign up today for Stock Advisor and get access to our exclusive report where you can get the full scoop on this company and its upside as a long-term investment. Learn more and get started today with a special new member discount. It also helps to look at Bitcoin's BTC price history. Bitcoin is the oldest cryptocurrency and a look at its chart shows several significant price drops.

What's reassuring is that so far it always recovers and goes on to hit new highs. Rather than focusing on how much the market has dropped, try to use this time to research. Time spent learning -- either about cryptocurrency in general, or individual cryptos in particular -- is never wasted. If there's a sector of crypto you want to understand better, that's a good place to start.

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