As the data of the last 2 years has shown and since 2020, the landscape in the Cryptocurrency ecosystem has changed radically. After many coins reached their highest historical prices, all enthusiasts predicted good things for the Crypto world. However, these high expectations were cut short by a resounding fall, a fall that is very normal within the ecosystem, and that many experts are already used to, but casual investors are not.
Sometimes many media or personalities generate a shower of criticism at times like these where the Cryptocurrency market regulates itself and corrects the real price of a Crypto asset, and with these sensationalist news that in most cases are negative things towards the Cryptocurrencies generate an environment of uncertainty and mistrust.
For years the prices of Cryptocurrencies have been in complete chaos, for this reason it is one of the investments with a high risk classification, since its prices fluctuate very aggressively.
If we take Bitcoin as an example, we will be able to demonstrate these changes, we only have to do a small graphic analysis of the first years of this Cryptocurrency, where in a matter of weeks it could lose almost 50% of its value and recover it in a matter of months. These events are known as value corrections, what many media have called bubble bursts are simply corrections made by a highly speculative market such as the Cryptocurrency market.
Whether we like it or not, the Crypto asset market is a market that is characterized by high levels of speculation, where either by the promise of high returns in the future or by sensational news that tells us that some currency will rise in price in the next few years. In the coming days, all these factors contribute to the entry of users who only invest with the purpose of obtaining a great return and withdraw their investments at the minimum of change.
These people are known as speculators and they are partly to blame for the instability of the prices of Cryptocurrencies and almost any investment tool; Thanks to these graphs and other technical analysis indicators, we know that these falls occur approximately every 2 years just before a Bitcoin Halving and that thanks to these corrections the cycle repeats itself and the price rises again.
Perhaps this sounds crazy for many and even more taking into account how the Crypto market is at the moment, but thanks to market analysis tools, we know that the best time to invest in Cryptocurrencies in the long term is after a fall or price correction.
However, this analysis depends a lot on the type of currency and its behavior or relevance within the Cryptocurrency market itself, since it is not the same to compare a Cryptocurrency as influential as Bitcoin with another that is not so recognized, as well as other factors that can influence the price of a currency as well as political, economic and social events in the world.
If we take Bitcoin as an example, we can notice certain patterns that reveal the market corrections that this currency usually makes, if we look at a bitcoin price graph from its birth to the present, we will see that there are 3 large increases in price, the first in 2017, the second in 2020 and the third in 2021.
As we mentioned before, these corrections usually occur at certain times where events occur that can affect the entire Cryptocurrency ecosystem and therefore the market.
In the first big fall of Bitcoin that happens in 2015, just one year before the second halving, where the price went from being between $600 – $800 on 2014 to being almost $250 on 2015, as we can see, it was a price reduction by almost 60%, but in 2016 the second halving of Bitcoin takes place and the price enters an upward cycle, reaching between $2,000 – $4,000 on 2017. These abrupt rises have an explanation, usually around Cryptocurrencies there is a lot of speculation and sensationalism in the media, when the value falls many criticize and when it rises many celebrate, and with Bitcoin it is no exception, as soon as a currency recovers its lost value and later exceeds it, a wave of investment of people who want to be part of that “rise in value”, causing the price of said currency to inflate in a certain way.
We have the second fall on 2019 where the price went from being between $6,000 and $8,000 in 2018 to now being around $4,000, and as we see again it loses around 50% of its value again, this happens just one year before the Bitcoin halving, so that approximately one year later in 2020 when the third halving occurs, the price again begins an upward cycle that got out of control due to other external factors, reaching $12,000 by the end of 2020.
For the third fall we find a totally uncontrolled price due to an event that occurred in the world and that positively affected the price of Bitcoin, in 2020 with the social, economic and political stress generated by COVID-19 the price shot through the roof, reaching between $55,000 – $65,000 by 2021, which can be understood because many countries encountered economic crises and, in particular, the governments of Europe and the United States injected a large sum of money into their economies, being reflected in the purchase of Cryptos. Once the measures taken against COVID-19 were appeased, the third great fall of Bitcoin occurs in the year 2022 where the price reached $15,000 after having been at $65,000.
It is estimated that this price will remain this way until 2023, since Bitcoin’s fourth halving is expected by 2024, and with the help of this feature, the currency and the market will begin their bullish cycle again.
As we can see, the Cryptocurrency markets usually react to certain events that occur inside and outside the Crypto ecosystem, and these events can positively or negatively affect the price of the different digital assets; Something that we have to emphasize is that not all Crypto assets behave in the same way. This analysis is based on the behavior of coins such as Bitcoin or Ethereum, where its relevance allows us to delve into details that can affect these coins.
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This is due to the great influence that Bitcoin has within the Cryptocurrency ecosystem, this is an effect that is usually seen in different investment markets and not only in Cryptocurrencies, where everything that affects the most popular asset can be reflected in assets with the lowest market capitalization.
Like all investment tools, there are internal and external factors that affect the market, Cryptocurrencies are no exception, because the participants in these markets are people who are governed by the economic and social policies of their governments, these same policies affect the participants of a market can equally affect the market itself, among these factors we can find government policies, economic policies and social policies.
Something widely used by investors in Cryptocurrencies in the face of a general drop in prices is to freeze their investment in a stable currency, since in this way if there is a sudden drop they only have to freeze and buy the same amount or more Cryptocurrencies when they are available at a lower price.