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The End of a Speculative Wave, But Not The Bull Market

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The End of a Speculative Wave, But Not The Bull Market

Introduction

This article was posted on Saturday, 14:42, UTC.

Today is the day when risk returned to the coin market in earnest. Cryptocurrencies are crashing since Bitcoin experienced another wave of selling during the US session on Friday, after Thursday’s spike lower. BTC breached the $2000 level, and the $1000 correction sparked a bloodbath in the coins with no redemption coming from the Asian markets this time around. All the majors are down by anywhere between 20% and 50%, and the newcomers are also hit hard without an exception.

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Is the boom over? That’s the question in everybody’s head now, but before answering that, let’s put the current decline into perspective. The total market cap of the coins fell from $90 to $60 billion in a matter of hours on seemingly no news. The 30% decline pushed the market back by a mere two-weeks of the bull-run, as the $60 billion mark was first reached in the second week of this month. So, while the decline is painful, it might turn out to be just a blip looking back at it, and this is by no means the end for cryptocurrencies.

How to Handle the Crash?

The recent parabolic rise was based on solid fundamentals, which haven’t changed overnight, but the amount of new capital pouring into the market created an unsustainable trend. Sentiment has to reset for the bull market to continue and that could happen by the correction in price and with time. Dealing with it depends on your time horizon.

Traders should cut back on trading sizes until volatility declines, and at least the short-term (5-10 min charts) turn positive. Bitcoin started the sell-off, so one would expect BTC to lead the way out from it as well, but as the panic cools off, other coins might emerge as leaders, so keep an eye on all your candidates. Putting on small trades near the main support levels that you are watching is a great way to keep in touch with the market, without betting the farm on an immediate rebound.

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Doubling down in these markets is not a good idea (as a trader), as markets might go way lower than you’d expect without absolutely no “rational” reason. Also, be prepared that there could be quick bounces that will suck in people, just to end in another wave of selling.

Investment positions shouldn’t be affected by the correction, and you should be looking for bargains to add to your holdings. Again, the main support levels (like $1875, $1600 in Bitcoin) could be used for this purpose, but remember that seemingly crazy levels might come into play, so don’t put everything on the table at once.

Let’s look at the charts in our next post!

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Mate Cser

Mate Cser

Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.

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