- Cryptocurrencies are the most volatile asset class in the world, making price corrections a fairly common occurrence.
- A price correction may be defined as a sharp fall in an asset’s price by about 10%.
- Corrections usually occur after a bullish surge in prices.
- Bitcoin’s latest correction sees the price fall by over 10% to trade at $47,911.00, while Ethereum’s price correction sees it trade at $1,534.40.
Price correction in cryptocurrencies is a fairly common occurrence as a result of its high levels of volatility. If you’re a new trader, you should be prepared to have probably the wildest roller coaster ride of your life.
A price correction may be seen as a steep fall in the price of an asset of about 10%, and lately, the entire cryptocurrency industry has seen a price correction. Bitcoin’s value slumped by over 10% to trade at 47,911.00, while Ethereum dropped by 16.51% in the last seven days trading at $1,534.
What is A Price Correction?
Before we delve into the myriad reasons for a price correction, it is ideal to understand the concept. A price correction occurs when an asset’s price falls by more than 10% but less than 20% from its most recent high.
Etymologically, this phenomenon has christened a correction because the drop “corrects” and prices return to their long-term trends. An example is the epic Bitcoin bull run of 2017, which saw Bitcoin leap from a mere $900 to a whopping $20,000 before experiencing a price correction.
It is not always easy to ascertain whether a correction will always lead to a further drop in prices. Still, statistically, price corrections signal a recovery in prices and set the stage for another price rally.
On the Flipside
Reasons For Price Corrections
The reasons for the price correction of crypto-currencies are not far-fetched. The purpose is to interrupt an uptrend in asset prices. It usually occurs after a price rally triggered chiefly by investors’ panic selling to rake in profits.
Price corrections are simply a natural cycle in the history of big asset classes. The imminent threat of tight regulations on Initial Coin Offerings (ICO) is also touted to cause a price correction.
Without a price correction, the market may balloon out of control, and it is through a price correction that things are kept in check.
The latest price correction sees Bitcoin and other atcoins slump by over 10% within the last seven days. Worthy of note is Bitcoin, which lost over 10% of its value to trade at 47,911.50, while Ethereum trades at $1,534.40, having lost over 16%. Other coins such as Litecoin, Chainlink, and TRON lost 16.26%, 12.83%, and 11.29%, respectively.