Bitcoin has quadrupled in value since September, and a correction is inevitable in any digital asset’s life cycle. As an investor, you should expect to see market corrections, but not too many. A healthy correction is expected when a market reaches a critical mass. The price of bitcoin, for instance, is likely to rise again, and a correction is inevitable with a digital asset.
Bitcoin’s Value Has Quadrupled In September
The price of one bitcoin has nearly quadrupled in value since last September. In the past few months, bitcoin has surpassed Facebook as the most valuable digital currency, jumping from around $3,000 to over $40,000. The Winklevii, which owns nearly $1.4 billion in digital assets, tweeted about the price of bitcoin and its rising status. While the correlation between bitcoin and the recovery in the U.S. economy is questionable, it is undoubtedly true that cryptocurrency has been able to weather the downturns. Last September, bitcoin’s value dropped by almost 20%. Then, in January, it fell another 30%, dropping by almost a quarter by early February.
While many financial institutions have talked down bitcoin, others predict it will rebound. Bitcoin has surpassed gold as the most valuable store of value in the world, and investors have increasingly seen it as a hedge against inflation. Retail investors fueled the price spike in 2017. Still, the recent rise in the currency is mainly due to significant institutional investments and the proliferation of ways to buy cryptocurrency.
Unlike many other digital currencies, bitcoin has been used outside libertarian circles. Wall Street has been heavily involved in the Bitcoin value, driving its price from under $10,000 to more than $60,000. Because of these analysts’ efforts, many individuals have invested their savings in digital currency, hoping for a quick return. This investment has certainly worked, but there is no certainty that the cryptocurrency will stay there.
Volatile Asset
Corrections in the cryptocurrency market are not new. They are caused by negative news, government bans, and other external factors. But they only affect short-term traders and late-comers. Long-term investors should ignore these corrections. They are good opportunities to purchase high-quality stocks at lower prices. Here are some reasons why corrections in the cryptocurrency market are suitable for long-term investors.
While some investors and traders regard corrections as setbacks, others see them as an opportunity to invest or hoard coins. Some analysts believe that the current dip is a healthy correction. For these investors, a correction is an opportunity to buy coins and avoid investing during a bull run. But others say that a correction is only healthy when it leads to rebounds. However, it is not wise to bet on a crypto market correction without knowing how much your money is worth.
While the cryptocurrency market is volatile, most investors tend to think short-term. Bitcoin, for example, is a decade-old asset still at a nascent stage. It is therefore prone to sharp highs and lows. That said, if you plan to hold your cryptocurrency for the long term, you should be ready for the inevitable volatility. If you are new to cryptos, you should consider investing with a platform like CoinSwitch Kuber, making investing more accessible.
It’s A Digital Asset
The cryptocurrency market is undergoing a correction similar to a stock market correction. In the last two months, the value of all digital assets has dropped by about $1.4 trillion. Early Saturday, the total value of digital assets was around $1.6 trillion. Many crypto advocates say it will change finance, but most investors buy crypto merely as a speculative bet.
Read More: Analyst Predicts Bitcoin Price Correction
Subject To Market Corrections
While we’ve seen the bull run that led to bitcoin’s price growth, there are also many signs that the market is undergoing a correction. While the reason isn’t known, it’s probably due to a power outage in some Bitcoin mining locations in China, which caused the network’s total hash to decrease. There are also technical factors at play. These include market liquidity and circulation, headline news stories, and shifts in policies and regulations. Market corrections are nothing new in cryptocurrency, and savvy investors have taken advantage of these times to understand the space better.
For those investors who are new to the cryptocurrency space, a correction may appear a scary prospect. A 10% loss in the value of your crypto portfolio may seem fatal, especially if you’ve leveraged your positions. However, you may not be as concerned if you’re a long-term crypto user. You can set stop-limit orders to take advantage of price corrections and exit the market before losing too much value. These orders will trigger when the cryptocurrency reaches a preset price level.
These corrections happen for a variety of reasons. Most investors sell their assets in fear of a market decline. Unfortunately, they rarely last long. These corrections don’t last long, and investors should always consider the long-term impact of their actions before making any final investment decisions. And even if they do happen, they’re usually short-lived. The key is to remain patient and remain disciplined.
Setback
Although a recent Bitcoin crash is a setback for the cryptocurrency industry, the price of the popular digital currency is still higher than its all-time low. The recent decline in price is a disappointment for institutional investors and enthusiasts. Some investors are using the sell-off as an opportunity to buy more bitcoins. One such company, MicroStrategy, announced plans to buy $489 million worth of bitcoins, raising their total holdings to 105,085.
Some experts believe that the situation of Luna and TerraUST is a temporary setback. However, this could signal a trend in the market that will eventually lead to higher prices. However, cryptocurrency pundits are waiting for a bullish trend in the market. The crash in TerraUST and the recent failure of Luna may prove to be a catalyst for new regulation. There is still much room for growth, and the adoption level will need to remain high for the industry to flourish.
One of the reasons for the recent collapse of the TerraUSD stablecoin has hit sentiment. The stablecoin is a critical element of the cryptocurrency market and where traders park their funds. The failure of the TerraUSD could be an existential test for the entire digital asset ecosystem. Concerns over regulatory issues and security breaches have further weakened investor confidence in the crypto market. Moreover, the recent spate of cryptocurrency fraud cases has weakened confidence.
It’s Good For Crypto Projects
While it may sound counterintuitive, the correction in the cryptocurrency market is good for crypto projects. While many factors affect the price of cryptocurrencies, it is essential to remember that prices are not regulated. They function entirely on demand and supply. As a result, the price of crypto coins may spike and crash as new investors and traders dump them as soon as they see cracks. The correction in the market is a natural process. Ultimately, it will help new projects thrive.
Historically, the banks have connected those with money with those who need it. However, recent developments have led to increased disintermediation in the financial industry. Advances in mobile payments and internet banking have sparked a corresponding increase in the usage of alternative payment methods. While this is a good thing for crypto projects, it can also lead to panic in the market. Investing small amounts in projects you believe in, and t, the dollar cost average is crucial. The correction in the cryptocurrency market can be a critical time for the cryptocurrency market.
The price correction in the cryptocurrency market is a good thing for new crypto projects, especially those in the development stages. Initial coin offerings (ICOs) benefited from the price rise, but many ended up scamming customers with false return claims and stealing their money. With overflowing liquidity in the market, cryptos prices often spike, creating a bubble-like situation.
