Sometimes the cryptocurrency market corrects by 25% or more. Dec. 21 – 22, was one such time. From a positive frame, crypto just went on sale for the Holidays.
You can get a sense of what happened and where we might be heading next on tradingview.com (For a “laugh” see: Christmas tree pattern; for something more serious see: BTC – Market Sentiment Greed and Fear!).
I’ll summarize it in a step by step recount of what happened and what probably happens next:
- Bitcoin had done really well the past few weeks. It went from about $10k to $20k.
- Alts had done even better after that. Many outperformed Bitcoin in early December in general.
- The market was hot and no one could lose if they bought and held!
- GBTC was up and back to having a 100% plus premium.
- Everyone was a genius.
- Then Bitcoin resisted $20k twice. After the second time it started a downward trend.
- Then Bitcoin Cash got listed on coinbase and some controversy started.
- That tiny squabble between the Bitcoins, which involved what seemed like a dump of Bitcoin and pump of Bitcoin Cash, didn’t just disrupt the Bitcoin market… it seems to have set the correction course Bitcoin was headed on in stone.
- Analysts didn’t fully agree on what the correction would look like, but reasonable predictions ranged from a $10k – $13k bottom. This is of course exactly what occurred (thus far).
- Then, as so often is the case, Bitcoin’s decline took the entire crypto market down with it.
- The result is Bitcoin fell from about $20k all the way back to almost $10k (nearly a full 50% correction from its high to its low). Meanwhile, altcoins (coins that aren’t Bitcoin) fell even harder. That resulted in Bitcoin’s price to USD declining about 50% and alt’s price to Bitcoin declining as well (their price to USD declined a bit more than Bitcoin’s on average). NOTE: Bitcoin resisted $10k and bounced back to the $12ks very quickly. Further, it wasn’t in the $18 – $19ks for long. Thus the actual correction for most buyers ended up being more like 25%.
- Still, Bitcoin is up 30% from a few weeks ago, 400% from the summer, and countless percents from back in the day. Likewise, the same is essentially true for altcoins.
- Luckily for some holders, a few coins weathered the storm better than others. Ripple stood out in that it didn’t lose value against BTC. Cardano and Verge held up well as well (they had all been doing very well before the correction set in). A few odd coins even went up during the correction.
- Generally at times like this, if you missed your chance to get out at the top (clearly in retrospect bailing right after it resisted $20k the second time would have been a good move), you want to go to plan B (or some peoples’ plan A) “hold and average into the dips.” That is, you generally don’t want to cut your losses in crypto trading, you want to build a better position for next time (9 times out of 10 this is true for top coins; However clearly this is dependent on your own goals, risk tolerances, investing strategy, and your research into the conditions of the current market).
- Why would the general rule of thumb be to build a position here when everything looks so bleak? The answer is that the same charts that predicted this correction tend to predict another wave to new heights in the next cycle. They tend to predict not the end of crypto, but a new all-time highs.
- In fact, there is a chance that those waiting to buy will actually be pretty stoked to sit down over the Holidays and finally start investing in cryptocurrency. After-all, anyone who thought they missed $20k now has a brief chance to buy in around $13k. That is hard to beat. Merry Christmas and Happy Holidays!
- Thus, if we chalk what happened up to a healthy correction. And if we trust that crypto hasn’t seen the highest points it will see. Then we want to consider how we will build our position for the next wave. Do we wait for a bottom below $12k? Do we wait to see if Bitcoin dips under $10k? Will it even go to $10k – $11k again?! Wait, what if it goes to $5 – $7k?! Wait, it could go to zero?!?! It is
hardimpossible to say where will we find support and resistance. My personal thoughts are, with this always being true in any market that isn’t the end of days, it is best to average in as Bitcoin (or whatever coin you are investing in) dips. As, it is near impossible to time the bottom, and waiting too long can leave you missing out on the best buys. There is nothing stopping Bitcoin from going to zero, but if you look at the tradingview post “BTC Hello correction” and the current market … you should get the general sense that literally zero is very unlikely and that coming back after a correction is more likely than that.
The bottom line is: The Bitcoin Cash drama once again was the straw that broke the camel’s back, but let’s be honest, the camel’s back was already in poor shape after the bull run to $20k before the year’s end. A correction was needed. It happened. Now instead of new investors buying in at an all-time-high people get to join in the “fun” this Holiday at new low prices. Crypto is currently on sale for Christmas, if you want to be in this for the next wave… you likely have to act quickly. It could get bad before it gets worse, but more often than not in crypto windows in which you can buy low don’t tend to stay open long.