Bitcoin Dips Under $37,000 as Extreme Fear Dominates

The granddaddy of crypto just hit a two-week low.

Bitcoin (BTC) has just fallen to a new two-week low as tensions between Russia and Ukraine continue to escalate. Global equity prices fell across the board on market reactions to the latest moves from Russia, and crypto prices were no different.

The price of Bitcoin has fallen for six consecutive days. According to data from CoinGecko, it dropped as low as $36,545 late last night -- its lowest point in two weeks. This is around 45% lower than its November all-time high.

Extreme fear dominates mood

The Crypto Fear and Greed Index is designed to analyze the all-important emotions and market sentiments that often drive crypto prices. It puts the market in the extreme fear category today, with a score of 20 out of a possible 100.

Given that crypto prices have floundered in recent months, it isn't surprising that investors are worried. Prices were initially hit by the Federal Reserve's decision to pull back on pandemic related economic stimulus measures, as well as mining issues in Kazakhstan. But most cryptos have struggled to regain any sort of momentum.

The index can be a good barometer of the general mood of investors. It takes various factors, including trading volumes, social media content, and volatility into account. In November, when prices were hitting all-time highs, the market scored 84 -- putting it in extreme greed territory.

What next for Bitcoin?

As is often the case with Bitcoin, there's a lot of conflicting information out there. Some analysts are urging people to buy the dip in the belief that the granddaddy of crypto will go to $100,000 this year. Others are talking about a crypto winter and predicting the price will fall to zero.

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The truth is, nobody knows. There are too many factors at play. If the Russia-Ukraine crisis escalates further and Russia does invade, it will hit stock and crypto prices worldwide, not to mention the human cost. If the situation improves and conflict can be avoided, market confidence may increase.

There's also an ongoing question of what shape increased regulation may take. News reports say President Biden will shortly issue an executive order on cryptocurrency. But it still isn't clear how strict additional rules will be. The U.S. has said it won't follow China's lead and ban crypto completely, but that's not saying a lot. Lawmakers could still make life a lot harder for cryptocurrency projects and investors. On the other hand, appropriate regulation could build certainty and investor confidence in the long term -- but we have a long road to travel first.

What this means for crypto investors

The most important thing investors can do is avoid making panic decisions. It is scary to see your crypto portfolio almost halve, especially if you're a new investor who hasn't experienced these dips before.

If you're tempted to cut your losses, now might be a good time to pause and take a step back. One way to remind yourself that volatility is normal is to look at Bitcoin's chart over the past decade. It's true that past performance doesn't necessarily dictate what will happen next, but Bitcoin has rebounded from every drop and gone on to hit new highs. This may take time, but if you sell at a loss, you won't realize any gains if and when the price increases.

As a long term investor, it helps to keep your eyes on the five- or 10-year horizon and focus on the original reasons you invested in Bitcoin. Cryptocurrency investment is a risky and volatile investment, and there are a lot of unknowns. That's why it's advisable to only invest a small percentage of your overall holdings in crypto. But blockchain technology could transform the way we use money, and Bitcoin took a number of significant steps toward increased adoption last year.

Holding any asset through a prolonged dip is challenging. But as long as your overall investment rationale still holds true and you don't need the money in the short term, try to wait out the uncertainty. Even if it takes a while for prices to rebound.