Here’s What’s Really Happening In The Bitcoin (BTC) Markets Right Now

It’s fair to say that action over the first few days of this week in the cryptocurrency markets has been a bloodbath. Prices of all of the major coins declined by 50% or more in some cases and sentiment took a steep in the wake of the dip.

On Thursday, however, price is starting to recover. We’re seeing double-digit gains across the majority of the top twenty coins by market capitalization and sentiment, to a degree, is easing somewhat.

But the question on everyone’s lips is, what’s next?

And specifically, as relates to Bitcoin (BTC), is this the start of a longer-term bubble bursting scenario (as the mainstream media is suggesting) or are we seeing nothing more than a correction against the longer term trend and, in turn, does today’s action represent a bottoming out of said correction?

Let’s try and answer these questions.

On December 17, 2017, BTC reached highs in and around $19,800 a coin. By December 22, this had dipped to around $13,200 a piece – a dip of almost exactly one third in market capitalization across the five-day period.

BTC Daily Chart

At lows on Wednesday, January 17, BTC broke through the $10,000 floor to post lows at $9,650. These lows are around 25% off the above mentioned $13,200 price, and represent a more than 50% dip from all-time highs.

In a traditional equities environment, this sort of decline would be tough to see as anything but an outright collapse. This is cryptocurrency, however, and anyone that’s held bitcoin for more than a year or so will be all too familiar with these sorts of dips. Price fell more than 33% back at the start of September last year. BTC dipped 25% back in May, 2017. Again, a 25% dip came back in June 2016. A 35% dip took place at the start of January, 2017. At the end of 2013, price fell from $1131 to around $550. That’s a dip almost exactly the same size as the one we’ve just seen.

The key point here is that this sort of correction is nothing new in the bitcoin space. The only difference this time around is that more people are talking about it because major news outlets now feature the crypto ecosystem as part of their daily coverage.

When you get this sort of increased coverage, it increases participation and, in turn, amplifies the severity of any corrective activity. People who got in late last year see price decline, see Bloomberg report that the bitcoin bubble is bursting and sell out. This panic selling compounds the bearish action and tacks another 10-20% onto any fundamentally driven decline.

When you look at it this way, then, things aren’t even as bad as they have been on numerous occasions across the last two years.

So what’s a holder to do?

There’s really only one answer to this – keep holding.

You don’t need to be Warren Buffett to recognize that selling out now is an emotionally driven, reckless move. Sure you’ll be cutting losses if this coin goes to zero, but it’s not going to zero. Chances are what we are seeing right now is the bottom of a long overdue correction and, in turn, a period that just needs to be weathered by crypto holders.

To go back to Buffett, he’s a firm believer that you should be greedy when others are fearful and, vice versa, fearful when others are greedy. The crypto market, and especially as relates to bitcoin, just went from greedy to fearful. If Buffett were a crypto investor (which, as he’s pointed out on numerous occasions, he’s not), he’d be buying up as many cheap coins as his exchange limits would allow him right now.

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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