Relax, Cryptocurrency Crashes are Normal!

Relax, Cryptocurrency Crashes are Normal!

At the end of November last year, Bitcoin hit the US$10,000 mark which was considered to be the “moon” for many. After flirting with a value of $20,000 at the end of 2017, it crashed to the lows of just over US$12,000 right before Christmas. Demonstrating remarkable resilience, Bitcoin bounced back this year to highs of US$17,650 before plunging over the last few days.

The oscillating behavior is not limited to Bitcoin alone. At one point over the last two days, every single cryptocurrency in the top 100 of CoinMarketCap.com was in the red, indicating that plenty of traders worldwide were looking to cut their losses and get out of the game.

Speculations suggest that Asian traders are cashing out their cryptocurrencies to travel and prepare for the soon approaching Lunar New Year, which is the cause for the latest crash but there’s no real way to tell.

Fear, uncertainty, and doubt (FUD) surrounding suggestions that South Korea and China are planning a crackdown on cryptocurrency trading may also have contributed to the crash, with the two countries responsible for sizeable trading volume on exchanges around the world. This may have prompted investors to take their money elsewhere.

In addition, the presence of more technical investors in the cryptocurrency game may also have exacerbated the severity of the crash suggests Lanre Sarumi, CEO of Riskbone, speaking to Coindesk.

With more investors likely to set their stop-loss prices at support levels, this could’ve been misinterpreted by novice investors as a sign that a crash was imminent. This would’ve triggered a spate of panic sells, which may have had a snowball effect on the rest of the market.

However, experienced investors have suggested that the January crash is an annual occurrence and is a temporary blip in an otherwise upward trajectory.

We’ve seen price falls like this before, and when you look back on them now, you’ll see they weren’t part of a bubble, just a blip,” said Michael Jackson, the former COO of Skype speaking to Newsweek in an interview last month.

At its core it is still an international payment mechanism and a store of value – that doesn’t change with speculation.

At the time of writing, Bitcoin has rebounded to US$11,502 having dropped to a low of US$9,402 just two days prior. In short, there should not be much to worry about. Cryptocurrencies are here to stay and holding your portfolio over the long-term is most probably the best way to weather the storm. Compared to a year ago, Bitcoin is still up over 1,000%, and there is little reason to doubt it won’t continue to appreciate in the coming year.

In fact, seasoned crypto traders are probably rubbing their hands in glee at the steep discounts available for their favorite cryptocurrencies. By the time you read this, the road to recovery may even be genuinely underway.

Disclaimer: This article does not intend to provide, and should not be taken as financial or investment advice. You should conduct your own research thoroughly, and are responsible for any investment decisions you make.

Cover image from fortune.com

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