If you have ever opened a Bitcoin price chart in the last year, you would’ve seen one color only: green. Bitcoin’s price has skyrocketed for the last year, along with other altcoins, with many seeing their investments increase exponentially. However, this last weekend brought a unique correction to the cryptocurrency market. For those not familiar, corrections are pullbacks greater than 10 percent but less than 20 percent. Bitcoin proceeded to fall into correction territory on Sunday, falling nearly 13 percent from its high on Saturday.
Bitcoin is known for its immense volatility, but a 24-hour correction is very uncommon. Like most assets these days, Bitcoin’s fall was a reaction to a flurry of news. It was found that a blackout in Xinjiang, one of China’s largest states, was a key reason for the crash. Xinjiang powers a lot of bitcoin mining, which led to a mass liquidation of Bitcoin as many were worried. This blackout led to a significant decrease in the Hash Rate of Bitcoin, which is an indicator of how healthy and profitable the Bitcoin market is. This was paired with Turkey’s announcement to ban cryptocurrency payments, citing transaction risks and irreparable damage. One of the main risks of digital assets is the fact that governments do not like the possible downsides, so this news was certainly disheartening for crypto investors.
On the other hand, some see this as an opportunity to buy the dip. Cryptos haven’t been cheap recently, so contrarians view this as an opportunity to invest more money in the hopes of a pullback. As always, the debate over cryptos is highly contested with valid points on both sides. Will you be buying the dip, or do you think the fall will continue?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.