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Bitcoin has become one of the best performing assets in the world over the past two years. However, even the asset generating the highest return has its ups and downs. Over the past decade, Bitcoin has grown immensely over a million times in value and popularity.
CoinSwitch Kuber has seen nearly 6 million Indians aboard the platform. Still, it has had its fair share of market crashes and corrections. When the price of this digital currency drops, it’s not uncommon for people to use words like crash and fix interchangeably. More often than not, investors confuse a crash with a correction despite the two terms having different meanings.
What 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 600% in six months and was valued at nearly $ 2,000 billion. of dollars at that time. It’s been a dark couple of months for the notoriously volatile digital currency. The price of Bitcoin fell 30% at one point when the China Banking Association warned its member banks of the risks associated with digital currencies. Although the drop narrowed to less than 10% on the same day, the market value of Bitcoins fell by almost $ 70 billion in one day.
According to Coinmarket cap, Bitcoin has lost almost 32% of its value in the past three months after hitting its all-time high of $ 64,800, but is still up 300% from last year. According to a Reuters report, the fall in the price of Bitcoin was triggered by:
China bans financial institutions from providing cryptocurrency-related services. Elon Musk’s tweets on environmental sustainability issues surrounding Bitcoin. AND Spotlight Special Since Bitcoin has fallen to almost half of its all-time high, most investors fear that we are in the midst of a Bitcoin crash similar to the Black Thursday Crash of March 2020. On the other hand, analysts and investors suggest the decline is just a correction in the crypto market. What is a crash? In traditional finance, an asset collapses if its price drops by more than 10% in a single day. Crashes are often triggered by hard-hitting and sudden moves in the cryptocurrency market that could cause panic among investors who are exiting the market in droves. For example, when Elon Musk tweeted about sustaining Bitcoin in an environmental way. While technical factors such as demand play a vital role in the price of Bitcoin, other fundamental factors such as macroeconomic events, the sudden implementation of regulatory changes, or major corporate announcements could cause a major collapse. of the market.
The crash that took place on April 10, 2013 is by far the most significant crash. This happened shortly after the U.S. Financial Crimes Enforcement Network (FinCEN) shut down the Bitfloor crypto exchange and announced that Crypto exchanges are required to register as a transmitter. silver. Meanwhile, Bitcoin prices fell more than 73.1% in 24 hours, from a high of $ 259.34 to almost $ 70.
One of the most recent examples of a crash is what we call the Black Thursday crash of March 12, 2020. After the World Health Organization declared the coronavirus a global pandemic, the value of Bitcoin fell by 40 %, from $ 7,969.90 to $ 4,776.59.
What is a correction? In general, any decline in the price of an asset is characterized as a correction when prices fall more than 10% from a recent multi-day peak.
Sometimes investors tend to overstate the price of Bitcoin. In such cases, the market tends to correct itself when the uptrend wears off, and traders need time to consolidate and recover. When most of the buyers have bought the asset and very few new buyers support the uptrend, exhaustion occurs. Prices start to drop when sales orders pile up and the order book does not have enough purchase order entries to match them.
Corrections are often initiated by minor events and technical factors such as buyers in the market facing intense resistance levels, low trading volumes etc. During technical analysis, this can often be detected with indicators such as RSI (Relative Strength Index) or Fear and Greed Index. .
Should investors be worried? Bitcoin’s volatility is not a phenomenon but is one of its main characteristics. This means that it is normal for its prices to move rapidly up and down. Analysts believe the current drop in prices could be a healthy correction and could be a good time to invest in the crypto market.
This is not the first time that Bitcoin has seen such a sharp drop in prices. While a 40% drop in value sounds dramatic, it is quite typical of volatile markets, especially after a massive over 600% rise in value. Even though Bitcoin has experienced a price drop of over 80% in a single day in the past, its value has rebounded more than ten times shortly.
At the time of writing, the value of BTC was around Rs 30,000,000. Although the longest bull run seems to have stopped, the value of Bitcoins is still 300% higher than last year. If someone had invested Rs 100 a year ago, they would have made a profit of Rs 300. Looking back, Bitcoin has always rebounded in value over the long term.
Unfortunately, most investors tend to think short term when it comes to cryptocurrencies, which is another cause of their volatility. The asset is only ten years old and is still in its infancy. Therefore, there could be some sharp ups and downs along the way. If you plan to hold Bitcoin for the long term, there is a good chance that you can reap good returns in the future. Platforms like CoinSwitch Kuber have made crypto investing easier, especially for those looking to hold the asset for a substantial period.
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