Bitcoin has had a bit of a wild time the last few months. After peaking at $20,000 last month, the cryptocurrency has seen a stark drop in value that has investors worried.
Well, it has the short-term and new investors worried at least, whereas bitcoin veterans seem to be assured it will soon recover. So why exactly is that?
Bitcoin dropped to $10,000 yesterday, half of what it’s peak value was in December. People are selling in a panic, likely because of the uncertainty after South Korea also banned cryptocurrencies in the country. This followed close on the heels of a similar China ban last year, as well as France and the US also promising investigations into the matter.
Many observers of this say the Bitcoin “bubble” has burst. But if you look at Reddit, a lot of long-term investors say this is normal. Many are denying this is a crash, instead calling it a market correction of sorts. And there’s some precedent for that to be true.
Consider this. When the market value peaked, quite a few investors would have decided to take their gains and leave. This in turn, because the number of Bitcoins now available in the market is higher, would have somewhat driven down their cost. Once that happens, other users would see the dip and panic, thinking they need to sell and get out before the market crashes. That then drops the value further. That’s the market correction theory proposed.
It goes on to say that, once the value has bottom out here, others will see the lower prices on Bitcoin and decide it’s time to buy, thus picking the price back up again and starting a chain reaction in the reverse of what happened before. As Redditor vegarde puts it:
"At some point, people start to think "ok, this is freaking insane gains! I will sell!". Once enough people do that, usually around psychologically important numbers (like, close to 20k), it will affect the price. This will make other people think "Fuk, it's going a little down! I'll cash out my gains here". And bring the price even more down. And this will continue until it meets the "Fuk! these coins are cheap now. It has to go up now!"-crowd. It's not magical at all."
In fact, many experts believe this is good for Bitcoin as a whole. The more frequently a correction happens as a cryptocurrency’s value rises, the smaller the market correction that happens. In this case, Bitcoin climbed about $10,000 in the space of a month without a correction, so it’s a hard one.
Of course, the volatility of Bitcoin is scary. But as much as these investors say it’s natural, there’s never really any guarantee of what’s going to happen. In years past, Bitcoin has faced similar dips in value in January, before eventually picking up a month or so later. But the situation has changed somewhat now. This time around, there are many more investors that could potentially panic and sell, causing the crypto to further spiral.
It could be mere days or months before we see the value pick up to a point where people aren’t worried about a crash anymore. Until then, your best bet is to probably just hold and ride it out instead of panicking and selling lower than you bought.