Major Market Correction – Good or Bad?

Cryptocurrency Exchanges
Codemotion Berlin 2018

On the 24th of December, Christmas Eve, nearly all of the leading cryptocurrencies saw their price decrease by a considerable margin – the second price correction this week. Bitcoin, Bitcoin Cash, Ripple, Litecoin, along with every other cryptocurrency in the market except for a few have once again declined in value.

Why Were There Two Corrections in One Week?

If we take a glimpse into the past, the price of cryptocurrencies tends to increase during holiday seasons, especially throughout Christmas and New Years. According to financial analysts, this rise in value is usually attributed to the introduction of new family members and friends to the cryptocurrency market.

However, this year’s holiday season was the exact opposite – not only were there no spike in crypto value, on the 22nd of December, prior to Christmas Eve, the cryptocurrency market suffered a heavy market correction. Bitcoin, leading the descend, fell over 45 percent in value while others fell by nearly 50 percent.

After a swift recovery, on December 24th, the market recorded yet another correction – something unheard of in the world of cryptocurrency. This phenomenon was unforeseen by most analysts and experts, and it can serve as a lesson to newcomers in the crypto market regarding the risks involved in trading.

Nevertheless, the cryptocurrency market has already exceeded the expectations of some of the most experienced, bullish and optimistic analysts and investors. In April, when the total market capitalization of all cryptocurrencies was at $30 billion, ShapeShift CEO Erik Voorhees speculated that the market valuation would surpass $300 billion in 4 years.

Fast forward just eight months later, the market cap of Bitcoin alone had already surpassed $300 billion, and the combined market valuation of all cryptocurrencies now stands at an unbelievable $533 billion (at the time of writing).

Why is Correction a Good Thing?

Major price corrections in the crypto market should be seen as a good sign as it effectively helps prevent the formation of short-term bubbles. Judging by the way the cryptocurrency market has been progressing so far, predictions for its performance next year are optimistic as it has always been able to bounce back from corrections, thanks to the rising demand from new investors.

Even Charlie Lee, founder of Litecoin and former executive at Coinbase finds the recent dip(s) in market valuation unsurprising:

Currently, the crypto market is seeing a price correction after a three-month bull run – a normal and healthy sign that the market still has a lot of room to grow.

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