A correction in the cryptocurrency market: what are the risks of such a situation?
Not long ago, Bitcoin stormed new highs above the 100,000 US dollar mark, and today it fell below 95,000.
Many of those who bought Bitcoin on the cryptocurrency market at the maximum price are starting to panic, because the price has dropped more than 10% from the maximum.
Moreover, a similar situation is observed for the majority of altcoins, which have shown record growth.
But if you look at the history of cryptocurrency price movements, you'll immediately notice that nothing terrible has happened; it's simply another correction taking place in the cryptocurrency market.
A correction in the cryptocurrency market is a temporary decline in the price of an asset after a prolonged rise, caused by profit-taking by traders or market revaluation. Typically, a correction (price pullback) ranges from 10% to 30% of the previous rise and is considered a normal phenomenon for price stabilization.
If we talk about the biggest corrections in the cryptocurrency market using Bitcoin as an example, the following events can be noted:
March 2020: Decline: Bitcoin corrects from $9,000 to $4,000, losing more than 50% of its value.
Reasons: Global panic caused by the COVID-19 pandemic, which led to a massive sell-off of assets as investors sought to move into cash.
May–July 2021: Decline: Bitcoin price fell from around $64,000 to $30,000, a decline of about 53%.
Reasons: Tightening cryptocurrency regulations in China, including a ban on mining and restrictions on trading activities. Elon Musk's announcement that he will no longer accept Bitcoin as payment for Tesla vehicles.
November 2021 – January 2022 : Decline: Bitcoin fell from an all-time high of around $69,000 to $35,000, a loss of about 49%.
Reasons: Expectations of tightening monetary policy by the US Federal Reserve, escalating geopolitical tensions and uncertainty in global markets.
May-June 2022: Decline: Bitcoin price dropped from around $40,000 to $20,000, a 50% decline.
Reasons: The collapse of the algorithmic stablecoin TerraUSD (UST) and its associated token, LUNA, which undermined confidence in the cryptocurrency market. A general decline in financial markets due to fears of recession and inflationary pressure.
As you can see, corrections in the cryptocurrency market occur quite regularly and can last from several months to a year, but despite this, in the long term, the upward trend still persists.
Therefore, if you made a purchase at the very peak, don't immediately panic and sell the coins you bought, especially if the price has already dropped by 10-20%. It's better to prepare for a long wait and wait for the price to rise again.
If waiting a long time isn't an option for you and you want to make money on short-term trades, then use a professional trading platform and cryptocurrency brokers .
In this case, you can even profit from cryptocurrency corrections by opening both buy and sell trades with or without leverage.
