In the last few years, Bitcoin has grown to be one of the best-performing assets in the world. It has grown over a million times in both value and popularity. However, all forms of assets face their share of crashes and corrections. Here’s all about how a crash and correction are different from each other.
Bitcoin and its recent history
In the past, this cryptocurrency has shown phenomenal growth. The cryptocurrency infamously grew by 600 percent in a matter of six months. However, it comes with the price of being the most volatile of digital currencies. At a point, the price of the cryptocurrency plummeted down by 30 percent. Its value dropped almost $70 billion in a single day. Despite showing 300 percent higher growth than last year, it is nowhere close to its former glory.
According to reports, the fall of Bitcoin value was triggered due to two main reasons. Firstly, it has to do with China’s ban on institutions in providing cryptocurrency services. The China Banking Association issued a notice warning to its member banks highlighting the risks associated with cryptocurrency. Additionally, Elon Musk tweeted about the environmental constraints associated with mining bitcoin. He even went as far as canceling bitcoin as a preferred way of payment to buy a Tesla. You might be wondering if these led to a bitcoin crash or if it was merely a correction.
What is a Crash?
A ‘crash’ of an asset occurs when its price drops over 10 percent in a single day. They are usually a result of sudden moves in the market and crate havoc when investors move out together. Elon Musk’s tweets are a great example of Bitcoin crash.
What is a correction?
A ‘correction’ on the other hand is a drop in the price of an asset over a period of few days after a peak. The market tends to correct itself when investors overvalue the cryptocurrency. In other words, corrections are initiated by small events and factors like resistance levels and low trading volumes.
