When it comes to cryptocurrencies, there is a certain amount of volatility that comes along with a correction that stabilizes a spike following the long-term trend of the particular asset. People use these “corrections” to buy, sell, or even get into the market.
The market corrections over here are mostly related to the Crypto market.
What is a market correction and how often do they occur?
Market corrections are associated with a sharp decrease of at least 5–10%. This generally occurs when a particular asset undergoes a huge rise. This market correction pulls the price back to its long-set trend. Most of the time, they are beneficial, but in some cases, they carry on for too long, culminating in a dreaded “bear market.” During a bear market, prices can drop by 20%, which can be a good time to buy in but also quite unpleasant for investors who are caught off guard. When it comes to stocks, bear markets rarely ever occur as they are more stable in the long term. This doesn’t necessarily make them better investments as they are manipulated by individuals with power, depending on their needs. With cryptocurrencies, volatility doesn’t come cheap as it is more likely to undergo a bear market or, at the least, a major correction.
If cryptocurrencies go through a major correction, then what?
Most cryptocurrencies, or basically all of them, have been following a bullish trend. It might not seem that way after Bitcoin and other major Altcoins like Ethereum losing around 30% of their value. A market correction is not the worst thing that can happen as it thins the herd of new investors and cryptos that have entered the market with the sole purpose of making a quick buck. You can think about it as testing your belief in a particular investment and how long are you willing to hold it for. Day traders receive the bad end of such corrections, but that is also why not everyone should day trade.
It is hard to deny that when the price of an asset continues to rise, it makes you feel good about your investment, however, this only lasts for a while. Once new investors are driven away, the prices will return to a more considerable number. This leads to making changes to the particular currency, introducing new upgrades, and above all, providing actual value. Investors who are dedicated to specific assets don’t let corrections influence their willingness to hold. Although this doesn’t put away the fear of a looming bear market.
In case you find yourself in the midst of a major correction, you can set orders that fill start selling once it reaches too low for you. In addition to that, you can begin to reinvest into stablecoins which will most likely hold their value, after which you can go back to investing in more volatile cryptocurrencies. If you truly believe that your desired asset will make it through the correction and it has a strong foundation that will let it bounce back, then you should feel free to continue holding your investment and letting the market decide its value.
Published By
DWAYNE D’CUNHA, WRITER ON MEDIUM.
Originally published at https://www.linkedin.com.
Check out our new platform 👉 https://thecapital.io/
https://twitter.com/thecapital_io
Should Market Corrections influence your Investment Decisions in the long term? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
from The Capital - Medium https://ift.tt/3gMKMMf
0 Comments