Recent days have brought a lot of excitement for holders of digital currencies. Volatility in this market has increased sharply, especially when viewed through the prism of the two most popular ones, namely bitcoin and ethereum.
In December last year, which is less than two months ago, there was a huge bull market in cryptocurrencies, where the price of BTC rose to a peak of almost $42,000, gaining 123 percent. At the same time, i.e. from the beginning of December to the historical peak, the price of ETH jumped by 143 percent. Nevertheless, such parabolic increases could be relatively difficult to sustain in the long term and sooner or later the market may collapse, creating corrections. These on the digital currency market are not unusual, and their scale is usually quite significant in percentage terms. The current correction on BTC/USD marks a 30 percent drop from its historical peak, while ETH/USD is down 26 percent.
However, the recent declines do not seem to have discouraged institutional investors from investing and led to capital outflows. According to data from the world's largest cryptocurrency fund, the Grayscale Bitcoin Trust, which manages nearly $25 billion worth of cryptocurrencies, it has acquired more than 31,000 bitcoins in the last seven days alone. Of which more than 9 thousand in the last two days alone. It is worth mentioning that the supply of bitcoin worldwide is less than a thousand coins per day.
In the cycle we are currently in, taking into account the halving dates (what is halving we explained here), the price of BTC in the past was also able to strongly correct previous increases. For example, in March 2017, the BTC price fell from $1280 to $940. In June and July 2017, the decline took place from $2973 to $1914. History, which may or may not repeat itself, therefore indicates that such sharp corrections may happen and are nothing new in this market. So anyone trying their hand at the digital currency market should take this into account and be prepared for periods of huge volatility.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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