Whether you're a novice trader or a seasoned crypto investor, it is sometimes pretty easy to get confused over some crypto-related terms, including crashes and corrections. Both of them are used frequently; however, they mean different things.
At BullPerks, we care about our community and do our best to educate users and crypto enthusiasts worldwide. So today, let's try to distinguish the differences between a crypto crash, crypto correction, Bitcoin correction, and what can be done during the market correction.
What Is Bitcoin Crash?
Cryptocurrencies are volatile, and Bitcoin, the leading and most popular cryptocurrency, is rising and falling sharply daily. This leads to Bitcoin corrections and Bitcoin crashes.
In traditional finance, a crash is a price drop of more than 10% in one day. These are often fueled by drastic and sudden changes in the cryptocurrency market that cause investors and traders to leave en masse in panic.
There is no doubt that technical factors can have a substantial impact on the price of Bitcoin and other popular cryptocurrencies. However, major crashes are still more catalyzed by fundamentals, including macroeconomic events, big company announcements, and unexpected changes to international regulations and policies.
Bitcoin vs. crypto correction
So, the price of digital assets is influenced by many factors — from high-profile news to the emergence of new technologies. In some cases, the rally may end in a complete collapse. In others, temporary price drops represent a correction. Such periods end either with the loss of savings or become an entry point to digital asset investment.
Since Bitcoin is the leading and most popular cryptocurrency on the market, its correction can also greatly affect the value of other cryptocurrencies. In addition, when talking about Bitcoin correction, many traders and experts also mean the correction of the entire crypto market.
For example, Bitcoin was worth over $64,000 in April 2021 due to the Tesla and Coinbase events. Elon Musk's announcement of a $1.5 billion digital coin purchase and the IPO of America's largest cryptocurrency exchange generated massive interest, which also affected changes in the price of other altcoins.
What causes Bitcoin correction?
High-profile events can cause the Bitcoin correction. For example, the market reversal was affected by important events, including the ban on Binance in England, the restriction of mining in China, as well as various statements by influential people and media personalities. On the positive side, Bitcoin became the official national currency in El Salvador, which caused enormous controversy around the world.
Crypto Crash vs. Crypto Correction
A crypto crash differs significantly from a corrective phase. It is a rapid drop in the trading price of Bitcoin or any other crypto asset due to a global event. As for a crypto correction, it is more like a pullback or a gradual decline where the market value drops by 10 to 15% over a week or even a month. In comparison, a crypto crash is an event when the global market drops more than 10% within a day or even just a few hours.
What is crypto crash?
A crypto crash occurs when a digital asset drops more than 10% on the same day.
This happens when some important news suddenly spreads in the market, and crypto investors begin to reduce their investments due to panic.
Many analysts and experts try to report impending crashes before they happen, but visualizing charts is the best way to identify panic conditions, and it is easy to understand even for a novice trader.
From a technical point of view, panic selling begins when uncertainty increases and any panic situation arises.
Crypto Market Volatility as a Key to Understand Why the Price Goes Down
Even though it can be frustrating, volatility is a natural part of a crypto market activity. It refers to changes in the asset price and can be both healthy and extreme. When volatility is healthy, it aims to serve many purposes, including providing profit opportunities. As for extreme volatility, it often has a negative connotation as it is usually associated with chaos, uncertainty, and loss. However, there’s also something positive here. The thing is that extreme price volatility cases are pretty rare, so investors and traders shouldn’t get upset when digital coins prices go down.
Volatility, or the market movement, has a notable role in any trading market, especially in crypto. If there are no movements at all, investors and traders won’t lose money but will not gain any either. Volatility actually helps traders maximize their gains. It can turn millionaires into billionaires overnight.
However, keep in mind that profits are never guaranteed when trading, and it is important to know how to protect yourself from heavy losses using ‘Stop’ and ‘Limit’ order features. Moreover, it is essential to learn how to Do Your Own Research. Please find out more in our BullPerks DYOR Guide to learn how to analyze IDO projects.
What to Do During a Market Correction?
There are several ways to survive a crypto market correction and a bear market. There are essential things to do and also crucial things it is better to avoid when the market is flashing red.
First of all, you should be patient and not overthink. Feeling anxious and uncertain will definitely not help you during the market correction. Moreover, you should stay diversified and remember that the market correction should not be a scary experience. After all, downturns can even become an excellent opportunity to start investing more.
Finally, don’t check your portfolio every day, and always remember about your own financial situation. For example, you can always stay up to date with BullPerks, the world’s first decentralized VC and multichain launchpad on the BNB Chain. You can learn which downtrends are crypto corrections and which ones are crypto crashes. It can help you to better understand the crypto market in general and how investors and traders react to certain fundamental and technical factors.
So now you know what is market correction in crypto. You should also learn more about the bear market, market corrections, crypto market corrections, financial market, bull market, financial markets, technical analysts, economic growth, traditional markets, market crashes, crypto assets. And if you have the following questions: what is a market crash? What is a correction period? Or trading volume, how to trade crypto, how to work with asset classes? Or even how the global pandemic affected crypto markets? Then follow BullPerks on social media, and continue reading our blog.
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Disclaimer. This material should not be construed as a basis for making investment decisions or as a recommendation to participate in investment transactions. Trading digital assets may involve significant risks and can result in the loss of invested capital. Therefore, you must ensure that you fully understand the risk involved, consider your level of experience, investment objectives, and seek independent financial advice if necessary.
