[ 🔴 DELETED 🔴 ] Topic originally posted in CryptoCurrency by faakhirali15 [link]
Since alot of the people newer to crypto are worried that the dip yesterday was a crash I decided to write this out in order to show how crashes are different from corrections.
A correction is often preceded by a prolonged rally, ussually a month or a few weeks. Many people are still waiting to buy at a lower price. The most important part is that, there is a general sentiment in the market that if the value of say bitcoin for example drops 20 %, it will still be worth buying. So when the dip is triggered by some unforseen event such as the recent China power outage or more ussually a massive liquidation of overleveraged accounts, people rush to the market to buy at a lower price. And the price corrects again.
A crash is often preceded by a prolonged rally of atleast a a few months and their is much more Greed and Fear in the market. Again when a dip happens due to some unforseen event such as a liquidation of overleveraged positions, alot of people think that the price of bitcoin for example is way overvalued and when the dip happens, they don't rush in to buy at a lower price. The traders who are were in this for a quick buck start selling off to save their initial investment. The greed turns to fear quickly and everyone starts selling off since no one thinks that a lower price is a bargain anymore.
Note: not financial advice and obviously more factors go into defining when a crash happens. This is just a description of what a crash looks like for the newbies.
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