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During the last few days, Bitcoin, as well as all of the other top 20 Cryptos have gone down in price by as much as 50% which is causing many people new to the space to panic. Has this happened before? Should you just cut your losses and sell? Why is the Crypto market so volatile compared to the stock market? All these questions and more will be answered.

How often do giant price corrections happen?

Price corrections where the overall price of Bitcoin dropped by 30% or more have happened several times this year, so the market is NOT “crashing” as people might say. Normally the market turns from being a normal correction to being irrational, and you can tell by how quickly the market drops. After hitting a low of below $11,000 at 9am today, a couple hours later at the time I’m writing this, the price is already back at over $13,400. All a price correction is, is just the market adjusting for an overvaluation. As of right now, Bitcoin is unusable and is overvalued in my opinion, so it is only natural that people take their profits and let the prices dip to a sustainable level. However, this correction was slightly irrational, as Bitcoin lost too much value over too short of a time period.

Should you just cut your losses and sell?

NO. People have this common belief that if their portfolio goes down in value, that means they lost money. You don’t gain or lose money until you sell your portfolio. It is common human emotion to buy on the top as you think that something will continue to rise, and to sell at the bottom as you think it will continue to fall. A disciplined investor or trader will do the exact opposite. What I’ve noticed is that after an irrational correction, the price level never has hit that low point again, so I advise people to buy during this time.

Why is the Crypto market so volatile?

Compared to the stock market, the Crypto market flies up and down much faster. For example, a typical return on a mutual fund for a whole year would be a measly 6%. In the Crypto space, people have made more than a 10,000% return on some assets in a year. The average daily volatility is much higher than the stock market because Crypto is traded much more often. Most stocks in the stock market are part of retirement plans, or savings plans that are managed by professionals. Therefore they are much less likely to fall in price by a large amount. This is just an opinion of mine, there is no real way to verify this, but most Crypto is used for trading purposes. Transactions are used to transfer Bitcoin between exchanges and few people actually buy things with Bitcoin. The majority of people in the Cryptocurrency space are investing for very short term and day trading is much more common than holding. There is a dedicated community of “HODLers” which stands for “Hold On for Dear Life” and many of them including myself have made money just buying and holding Crypto. The space also fluctuates because of its low marketcap compared to the stock market. The Crypto marketcap is in the billions while the stock market is in the trillions. It is much harder to move trillions out of a market than billions so naturally the assets with lower marketcaps are more volatile.

Overall, this price correction is nothing you should worry about. The hype on the news has caused many people to freak out about this supposed “crash”. Remember, you don’t gain or lose money until you sell. Buy the dips and sell at the top.

Thanks for reading guys! If you liked my article, you can donate Bitcoin Cash, Litecoin, or Ethereum to my wallet addresses. Lets be honest, nobody is going to donate BTC with such high transaction fees so why even ask for it anymore… If you’re broke like me, you can click on my affiliate links to get free Bitcoin and Dogecoin on the fountain website I use. You can also follow me on my official Twitter at “Jackson_Kwiat” where you can see my insight on anything cryptocurrency related.

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