Bitcoin has become one of the most powerful assets in the world over the past few years. But even the highest-yielding asset has ups and downs. Over the past decade, Bitcoin has seen immense growth by a million times in value and popularity.
CoinSwitch Kuber saw nearly 6 million Indians aboard the platform. Still, it has had its fair share of crashes and fixes in the market. When the price of this digital currency is falling, it is not uncommon for words like “crash” and “correction” to be used interchangeably. In most cases, investors will confuse a crash with a correction, even though the two terms have different meanings overall.
What has happened to Bitcoin lately?
The entire crypto market, including the largest cryptocurrency “Bitcoin”, experienced phenomenal growth between December 2020 and April 2021. The currency grew a staggering 600% in six months and was valued at nearly $ 2 trillion at the time. It’s been a bleak couple of months for the infamous volatile digital currency. Bitcoin’s price fell 30% at a time when the China Banking Association warned its member banks about the risks associated with digital currencies. Although the decline decreased to below 10% on the same day, Bitcoin’s market value fell by nearly $ 70 billion in one day.
According to Coinmarket Cap, Bitcoin lost nearly 32% of its value in the past three months after hitting its all-time high of $ 64,800, but is still up 300% since last year. According to a Reuters report, Bitcoin’s price drop was triggered by:
- China’s ban on financial institutions offering cryptocurrency-related services.
- Elon Musk’s tweets around Bitcoin environmental sustainability concerns.
ET spotlight specialWith Bitcoin falling to almost half of its all-time high, most investors fear we are in the middle of a Bitcoin crash similar to the Black Thursday crash in March 2020. On the other hand, analysts and investors suspect that the dip is just a correction in the crypto market.
What is a crash?
In traditional finance, an asset crashes if its price falls more than 10% in a single day. Crashes are often triggered by powerful and sudden moves in the cryptocurrency market that could panic among investors leaving the market en masse. For example, when Elon Musk tweeted about the sustainability of Bitcoin. While technical factors like demand play a crucial role in the price of Bitcoin, other fundamental factors like macroeconomic events, the sudden implementation of regulatory changes, or major company announcements could lead to a major crash in the market.
The crash on April 10, 2013 is by far the most significant crash. It happened shortly after the US Financial Crimes Enforcement Network (FinCEN) pulled the shutters on the Bitfloor crypto exchange and announced that crypto exchanges are required to register as “money sender”. During that time, Bitcoin prices fell over 73.1% in a 24-hour period, from a high of $ 259.34 to nearly $ 70.
One of the most recent examples of a crash is the so-called “Black Thursday” crash of March 12, 2020. After the World Health Organization declared the coronavirus a global pandemic, Bitcoin’s value plunged 40% from $ 7,969.90. a $ 4,776.59.
What is a correction?
In general, any drop in the price of an asset is called a correction, when the price drops more than 10% from a recent high over several days.
Sometimes investors tend to overestimate the price of Bitcoin. In such cases, the market tends to correct itself when the bull market is exhausted and traders need time to consolidate and recover. When most buyers have bought the asset and very few new buyers support the uptrend, exhaustion occurs. Prices start falling as sell orders pile up and the order book does not receive enough buy order entries to match them.
Corrections are often initiated by minor events and technical factors such as buyers in the market with strong resistance levels, low trading volumes, etc. During technical analysis, this can often be recognized using indicators such as RSI (Relative Strength Index) or Fear and Greed Index.
Do investors need to worry?
Bitcoin volatility is not a phenomenon, but it is one of its defining characteristics. This means that it is normal for prices to fluctuate up and down quickly. Analysts believe the current drop in prices could be a healthy correction and could be a good time to invest in the crypto market.
It’s not the first time Bitcoin has seen such a sharp drop in prices. While a 40% drop in value looks dramatic, it’s pretty typical in volatile markets, especially after a massive bull run with a value increase of over 600%. Although Bitcoin has seen its price drop over 80% in a single day in the past, its value quickly rebounded more than ten times.
At the time of writing, the value of BTC was roughly Rs 30,000,000. Although the longest bull run has apparently stalled, the value of Bitcoin is still 300% higher than last year. If someone had invested 100 rupees a year ago, they would have made a profit of 300 rupees. In the past, Bitcoin has continued to appreciate in value over the long term.
Unfortunately, most investors tend to think short term when it comes to cryptocurrencies, which is another reason for their volatility. The asset is only a decade old and is still in the early stages of growth. Hence, there can be sharp ups and downs along the way. If you plan on holding Bitcoin for the long term, the chances are good that you can make good returns in the future. Platforms like CoinSwitch Kuber have made crypto investments easier, especially for those looking to hold the asset for an extended period of time.
Disclaimer: The above content is non-editorial, and TIL hereby disclaims any warranties, express or implied, regarding it. TIL does not necessarily guarantee, endorse or endorse the above content and is not responsible in any way for it. The article does not constitute investment advice. Please take all necessary steps to ensure that all information and content provided is correct, updated and checked.
source https://dailyhealthynews.ca/decoding-the-crypto-lingo-how-a-bitcoin-crash-is-different-from-a-correction/
No comments:
Post a Comment