All media are full of headlines about the Cryptocurrency crash of January 2018. Prices are indeed retracing significantly this month. Most of the price correction happened the week of the 14th January. Is this a healthy correction for Bitcoin and other Cryptocurrencies? Are we about to witness the Crypto apocalypse as some financial media are predicting? We will cover our observations and perspectives in this article.
Cryptocurrency Correction or Cryptocurrency Flash Crash?
Although a 30% or more retrace could seem like a Crash in price, we need to consider the price retrace relative to the upwards move that preceded the retrace.
Let’s look at XRP price performance for instance: We have an increase from .23 to 3.3 between the 6th of December and the 3rd of January. That’s almost a 1500% increase within a month. With this in mind, does a 50% retrace still look dramatic ?
When looking at the news, we see the usual Crypto Crash analyses or predictions that we have been hearing every time there is a correction in Cryptocurrency prices. For investors and even traders, it is crucial to stick to facts and charts and filter out probably 99% of the news to make the proper decisions.
The first question one needs to ask is if the sharp correction is limited to the Cryptocurrency they are invested in? Limited to the Top Cryptocurrencies or a general sector correction?
The 2 charts below show that the price correction is sector wide. The Top 8 currencies index shows that early December signaled the beginning of a spectacular increase in Cryptocurrency prices followed by a sharp retrace around the 23rd, to resume the uptrend until the 2nd sharp correction this week.
The same pattern can be observed on the Top 500 Cryptocurrencies Index below:
This Price correction in the Cryptocurrency market shows again how Bitcoin is the sector leader in this volatile market. Not only that, but it is also a leading indicator of the market performance as shown by the following chart:
Cryptocurrency Market Crash or a Healthy Price Correction?
To answer our questions from earlier: Is this a healthy correction for Bitcoin and other Cryptocurrencies? Yes indeed, most Cryptocurrencies are still respecting their uptrends as shared earlier in our newly launched Cryptocurrency page.
Are we about to witness the Crypto apocalypse as some financial media is calling? As far as we know, this is not the end of the Blockchain technology or Cryptocurrencies. There is no fundamental reason that we have seen that points to a major risk or fail for either Cryptocurrencies or the underlying technology, if anything, we actually think this is the beginning of a massive mass adoption for both. There are more and more user friendly and accessible ways for retails investors to get exposure to Cryptocurrencies, which should fuel the demand even more.
To close, we want to reiterate that if you invest in Cryptocurrency, the market is very volatile. It helps to know what you are invested in, its potential and the real risks associated to it to filter the noise from the real threats. By doing that, investors can use the noise to their advantage and score decent entries while not getting shaken out or accumulate losses. Otherwise, cut your losses quickly till you see a setup that matches your risk tolerance.
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