Crypto Market Correction Provides Buy-on-the-Dip Opportunity
Cryptocurrency prices corrected sharply lower on Thursday, snapping a multi-week accumulation phase that pushed the overall market to five-month highs. With bitcoin (BTC) and the major altcoins pulling back from recent highs, the latest correction may present a unique buy-on-the-dip opportunity for investors.
Crypto Market Runs into Resistance
After soaring to fresh yearly highs, cryptoassets lost a combined $15 billion in market capitalization in the last 12 hours. After peaking north of $186 billion on Thursday, the crypto market cap was last seen hovering just below $171 billion. Daily trade volumes were reported at $61.7 billion, according to CoinMarketCap.
Bitcoin’s share of the overall market improved to 52.1%, the highest in six weeks, as altcoins and tokens suffered the worst of the drop. Bitcoin was last seen trading at $5,050.23, down 4.1% over the 24-hour cycle. On Wednesday, bitcoin was eyeing another major technical milestone. Read more here.
Among the top-ten cryptocurrencies, bitcoin cash (BCH) incurred the heaviest losses on Thursday, which is not surprising given its doubling over the past month. The BCH price fell 12.7% to $263.92, according to CoinMarketCap.
Litecoin (LTC), another top-performing cryptocurrency that had virtually tripled this year, fell 10.7% to $78.65.
Ethereum (ETH) swung back below $165.00, falling 8.9% on the day. The so-called developer’s cryptocurrency opened the week on a high and looked poised to play catch up with the broader market. Read more: Has Ethereum (ETH) Broken the Curse?
After leading the market higher midweek, EOS pulled back sharply yon Thursday, falling 9.7% to $5.33. The Enterprise Operating System enjoyed a broad push to the north after Coinbase Pro announced it was extending support of the digital currency.
Binance Coin (BNB) declined 8% to $16.98, Stellar (XLM) fell 8.8% to $0.1157 and Tron (TRX) traded almost 14% lower at $0.0262. Most of the major small caps also traded sharply lower, as the correction spread throughout the market.
The recent pullback in market prices was expected given the rapid accumulation observed over the past three weeks. Between March 26 and April 10, cryptocurrencies had gained $60 billion in combined market capitalization. Although the rally appeared sudden, it followed months of slow accumulation where smart money had absorbed much of the selling pressure.
As of Thursday, five large caps remain in accumulation mode. They are Ethereum, Stellar, Monero (XMR), Ethereum Classic (ETC) and Zcash (ZEC). These coins in particular are primed for a buy-on-the-dip entry, especially via BTC.
Investors buy-on-the-dip because they expect assets to increase in value. When an asset is in an uptrend, the ‘dip’ is essentially a discount that allows you to cost average at a more reasonable price tag.
In addition to the coins mentioned above, bitcoin, Litecoin and Binance Coin all demonstrate strong underlying fundamentals. Bitcoin is benefiting from a confluence of fundamental forces, including higher institutional adoption, technical progress and the return of retail interest. LTC and BNB have both traded on their own merits for much of 2019 and have slowly escaped bitcoin’s immediate sphere of influence. Like bitcoin, both cryptocurrencies are benefiting from higher adoption.
‘Crypto Spring’ appears to have carved out a linear path for digital assets, but the challenge for investors continues to be separating short-term volatility from long-term value. Sharp swings are not uncommon, even in bull market scenarios, and should be fully priced into the equation.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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