Bitcoin dropped below $10 000 on Tuesday, taking most of the other major cryptocurrencies with it. Pessimists regard this correction as a confirmation of a bursting bubble but choose to forget that both ups and downs are part of any market system. Cryptos are here to stay and there'll still be at least two years of exponential growth before any 'bubble' bursts.
Headlines shouting Bitcoin 'bloodbath'
#Bitcoin fell through the $10 000 mark yesterday and news headlines from all over the world shouted words like 'crush', 'bubble', 'tumble' and 'bloodbath'.
This morning, less than 24 hours later than the 'bloodbath', the same news sources are blasting about #Bitcoin's 15% rebound.
Here's the thing - markets fluctuate. It is a normal, and essential part, of how any financial market operates. Financial markets are driven by mainly two things: fear and greed. As soon as headlines start preaching doom, the majority of investors fear losing their money and sell, causing prices to drop. Once headlines turn positive again, those same investors hope to make a few bucks and buy again, driving prices up higher. The best decision any investor can make is to develop a strategy and trust their instincts.
#Cryptocurrencies are going nowhere
Taken into account that #Bitcoin only boomed in 2017, and cryptocurrencies are the fundament of blockchain technology, it's safe to say that #cryptos are going nowhere.
Prepare yourself to read bitcoin-related headlines for the rest of your life.
#Bitcoin is a game-changer. It started a revolution in the average person's thoughts about money, therefore, it's a highly controversial matter. Remember the DotCom bubble about 20 years ago? When everyone started a website and became rich overnight?
The same thing is happening in the Cryptocurrency industry. When DotCom burst, thousands of people who invested in low-quality websites lost tremendous amounts of money. Still, just about the whole world uses Google on a daily basis and those who've invested in the company are still happy with their investments.
Today, thousands of cryptocurrencies are available and new ones enter the market almost on a daily basis.
The cryptocurrency market will crash because there is no place in the world for useless money suckers. But just like the DotCom bubble, a crash will only be a sifting process that separates the useless from the valuable. History highlights the importance of investing in a strategy and not blindly selecting the first cheap ICO in the list.
Everyone is doing Bitcoin and that's the thing
With regards to the recent Bitcoin bloodbath, that apparently wiped out a few Bitcoin billionaires, it's important to keep in mind that the bitcoin market has its own personality. Bitcoin thrives on deep pullbacks. When analysing charts with Fibonacci indicators, it becomes evident that the crypto prefers corrections to 23.6%, 38.2%, 50%, and 61.8% levels.
Tuesday's drop to below $10 000 brought the price down closer to the 50% and 61.8% levels, while there is still more room to drop. Deep corrections like these will mean ruin to some, while it presents a valuable buying opportunity for others.
Another thing to keep in mind is that Bitcoin, and cryptocurrencies as a whole, are young and controversial markets. The past year's hype about the topic means that these markets include much more casual and inexperienced players than the average market. Where experienced investors act less on emotions, the sheer amount of casual bitcoiners will increase the impact that news headlines have on price fluctuations. Millions are buying and selling Bitcoin on a hunch and not based on research, which means that mildly positive or negative media feedback will reflect on price action to a larger extent than similar news would have on fiat currencies.
Investing remains a risky game
There is no reason to panic over the future of bitcoin or cryptocurrencies just yet. However, with the number of casual and overenthusiastic investors in the market, deep pullbacks like the current one is causing serious damage to quite a few.
Before making any investment, it's crucial to know, and stick to, the most basic golden rules. Never risk more than you can afford to lose. Never borrow money to invest. Only buy cryptocurrencies with money that you can live without. And always, ALWAYS research your assets of interest.
