Or, are we just in a period of consolidation where newcomers can expect a future rise and old-hands can make a more significant profit?
The hype surrounding Bitcoin and all of its derivative cryptocurrency siblings has been huge. Dubbed as “the future of currency” and a “new economy” Bitcoin was hyped up to extreme highs by the end of 2017 and took a few of its sisters along with it. Hype affected sentiment, and when the hype ran out, sentiment crashed, taking two-thirds of Bitcoin’s all-time high (ATH) with it.
Let’s think positive for a moment
Bitcoin hasn’t fallen anywhere near to its Jan 2017 price (hitting $1000 on the first day of trading 2017) If any other currency had increased its value by more than 1000% there would have been severe global economic repercussions. When prices suddenly dropped it wasn’t a bubble bursting, it was just a corrective shift.
I don’t believe for a moment that any reasonably experienced financial traders would have expected the uptrend to continue indefinitely, after a spike there is usually a corrective return to more realistic price. Bitcoin has proven that it can withstand the market shifts, it’s still around, and people continue to buy Bitcoins. It was the hype that caused the rapid price surge as new crypto investors, old hands and neophytes alike, jumped into the Bitcoin pool with the expectation of guaranteed returns.
Obviously, it’s not good news for those who joined the party late, but they will just have to wait it out until their investment matures and the Cryptosphere grows again, holding on for dear life (HODLing) until their investment peaks again.
Emphasising the point, don’t invest what you can’t afford to lose. I think the hype and ‘Fear of Missing Out’ (FOMO) temporarily overrode what traders have known for decades. Those who have left the crypto world at a disappointing loss were victims of ‘Fear, Uncertainty and Doubt’ (FUD), selling out to try and mitigate their losses before the market crashed completely
This is not the end. There is still more to come
No matter what the stock and forex traditionalists say, cryptocurrency is here to stay for the foreseeable future because it has become part of the financial landscape. Now, it is not just the long-term investors that are buying cryptocurrencies but also the short-term scalpers and even the CFD traders. There are a few detractors still gloating about “the bubble bursting” and preening in the light of their preference for more traditional trading instruments.
Cryptocurrencies are almost entirely sentiment driven, that is what people think they are worth and what they will pay for them drives the market. There is no fundamental analysis, and even technical analysis is wrong more than half the time. After the initial spike and inevitable fall, traders have been looking for the right time to enter the crypto market. Carefully analysing new rising trends and noting the resultant retracement.
In this time of stabilisation, between the extreme highs and lows that cryptocurrencies have achieved in the past 12 months, there is a common trend of short-term investment. Traders are far more cautious in their finances, and as soon as a bullish trend shows signs of either waning or breaking new highs, it triggers a ‘sell’ signal. At that point, all of these newly cautious traders are selling and guaranteeing the trend reversal, before they risk losing from the potential imminent change in trend direction.
So what will come next?
We’re not talking about diminishing returns here. The crypto market is still growing, and people are still buying, the trend has just slowed and is waiting for the rest of the financial world to catch up. Like any relatively new trend, there is volatility and traders from traditional backgrounds need to adjust their thinking and methodology to deal with the volatile crypto market, which relies heavily on market sentiment rather than technical indicators.
We are currently in a seller’s market, a market where investors have trained to wait for a new uptrend, only to start selling the moment it looks like the price has peaked. Consequently, drying up the potential for a greater high and also crippling the hopes of those that got in late on the uptrend. It won’t be long before this trend turns and becomes a buyer’s market. If you’re already conversant with crypto trading and know what you’re doing it’s a great time to be in the market.
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