What is digital currency?
Digital currency or the correct term for that cryptocurrency is secured by cryptography and it is also known as virtual currency, cryptocurrency and cryptocurrency, which all convey the same concept. cryptocurrency price also is important in this market, We will mention it later. also, You can read our cryptocurrency trading signal article and join to telegram channel for free crypto signal.
Encryption in cryptocurrencies makes it impossible to fake them or spend them twice. The distinctive feature of cryptocurrencies is their decentralization, all of which is provided thanks to blockchain technology. Blockchain technology is a distributed ledger that stores information within its network and distributes it among a large number of computers around the world. Blockchain in cryptocurrencies stores transaction information in each block. Blockchain is a network organized to ensure the authenticity and validity of transaction information, which is the main component of many cryptocurrencies. Cryptocurrencies are not created by any central or government entity, which can be considered one of their main features. This makes governments unable to manipulate their structure.
One of the fundamental nature is their cryptocurrency price fluctuations. The changes in the cryptocurrency price and the high growth potential of the cryptocurrency price of Bitcoin, the price of Ethereum, etc. have made this area attractive to many financial activists around the world. In the following, we are going to examine various factors about cryptocurrency price. Stay with us.
You can see the current cryptocurrency price from price monitoring pages such as Coin Market Cap or digitalcurrencysignal.com. On these pages, you can get detailed information about the current cryptocurrency price. 24-hour cryptocurrency price changes and a cryptocurrency price chart can also be accessed on this page. Also, the volume of transactions and the market value of each digital currency are updated in real-time.
cryptocurrency price fluctuations
The cryptocurrency price is known for its high volatility and many criticize it heavily. But this fluctuation in the cryptocurrency price is two-way. This means that not only the cryptocurrency price can suffer severe and heavy reductions, but also in the rising market, the cryptocurrency price can grow significantly and cause great profits for its investors.
However, many people are interested in or critical of this component of digital currencies. But it can be said that the high volatility of digital currencies has sent a lot of criticism towards them.
Since Bitcoin is the most popular digital currency in the market, fluctuations in the cryptocurrency price of Bitcoin can easily affect the price and cause digital currencies to decrease or increase. Many factors influence the cryptocurrency price fluctuation, and here we mention only three of them.
• One of the important factors is news events, which can include positive news such as the acceptance of Bitcoin or digital currencies by large countries and organizations, or negative news such as the banning of Bitcoin and Bitcoin mining by major countries in the world such as China. The media has a significant impact on the current cryptocurrency price fluctuation of Bitcoin and can reduce the cryptocurrency price of Bitcoin against traditional currencies or fiat by creating fear and causing the instant cryptocurrency price to decrease. Many believe that in the past year, Bitcoin has reached a new maturity in front of the media, and much negative news like in 2017 cannot affect the price of Bitcoin and ultimately the cryptocurrency price.
• Another factor is the fluctuation of the cryptocurrency price of Bitcoin and other digital currencies related to their holders. Some investors own a large part of digital currencies, so-called whales. Investors with millions of dollars in digital currency can easily create a huge swing in the market by converting their cryptocurrency to fiat. Of course, they do not sell all their assets at once and it is not clear how they sell their transactions; But they can easily manipulate the cryptocurrency price by creating selling pressure.
• When the crypto community is exposed to security vulnerabilities and intrusions, the cryptocurrency price fluctuates. If this security breach is related to Bitcoin, the volatility in the digital currency market will multiply. Bitcoin has not been hacked to date and its supporters consider this factor as one of the important features of Bitcoin. As soon as rumours about hacking Bitcoin or other well-known digital currencies are published in the market, it harms the digital currency market. Since digital currencies are open source, all their problems should be publicly reported and security issues raised by developers to create consistent solutions.
The development of digital currencies and open source software is based on this fundamental approach that a copy of the software code is provided to users for review and its codes are transparently available to the community. This concept causes the digital currency community to announce issues surrounding software design and code modifications, and security issues are raised publicly.
Why are digital currencies so popular?
Cryptocurrencies are popular for several reasons. Many criticize the removal of central banks from controlling and managing the printing and supply of money because banks eventually lead to a decrease in the value of money through inflation. And they support digital currencies because no organization has control over them and they have anti-inflation properties.
Blockchain technology, which provides a decentralized system for digital currencies, is another reason for the popularity of digital currencies. Decentralized and distributed processing of transactions in the blockchain is much safer and more transparent than traditional payment systems.
Some also consider digital currency as the currency of the future and believe that the global money system will switch to blockchain technology and digital currencies will be accepted over time, and as a result, they try to collect and keep more digital currencies.
Others like it because cryptocurrencies are highly volatile and their value increases over time. Over time, Bitcoin has experienced a significant price increase, reaching its highest price of $64,800 on April 14, 2021. When Bitcoin was launched in 2009, it was only 30 cents. The Bitcoin price chart has shown from the beginning that over time its cryptocurrency price has increased significantly and since Bitcoin has a significant impact on the digital currency market, other digital currencies have also followed this trend and faced significant growth along with Bitcoin. have become. For this reason, digital currencies are popular for many because of their long-term cryptocurrency price increase.
You should note that there are many risks in this market, which are mostly unregulated around the world. Therefore, before investing in digital currency, get to know the market conditions and fully understand digital currency and read about it and enter this market with sufficient awareness and knowledge. Never invest money you cannot afford to lose. Lawmakers are still trying to classify cryptocurrencies based on trading, payment, anti-fraud, tax and other criteria. Clear legislation can help the use and use of digital currencies and their future.
What is a cryptocurrency price correction and how is it different from a price crash?
As we mentioned earlier, the terms fall and cryptocurrency price correction each have separate meanings; And this is something that even professional cryptocurrency traders may not be aware of. In this part of the article, we will examine the exact meaning of these two expressions.
falling cryptocurrency price
According to our definitions of traditional markets, when the cryptocurrency price of an asset drops by more than 10% in one day, we say that the price has “fallen”.
These price reductions are often accompanied by sudden and impressive changes in the digital currency market, and the combination of these factors causes many investors to exit the market with fear.
Although technical factors can have significant effects on the price of Bitcoin, large falls are more often caused by fundamental events such as macroeconomic events, announcements by large companies, and sudden changes in international laws and policies.
Bitcoin’s biggest crash occurred on April 10, 2013; After the US Financial Crimes Network (FinCEN) shut down cryptocurrency exchange Bitfloor and announced that Bitcoin exchanges must be registered as “money transmitters”. According to data from Bitstamp, the cryptocurrency price of Bitcoin fell 73.1% in 24 hours, from $259.34 to $70.
On March 12, 2020, after the announcement of the global pandemic of the Coronavirus by the World Health Organization, on a day known as “Black Thursday”, the cryptocurrency price of Bitcoin dropped by 40% from $7,969 to $4,776.
When the upward trend of the cryptocurrency price falls and gradually decreases, so that it decreases by more than 10% in a few days, it is said to have undergone a correction.
Typically, a correction (price) of a digital currency indicates that bull market traders are taking a break. The traders who have made a lot of profit from the upward trend of the price tend to withdraw their profit from the market of this currency. This exhaustion occurs when the majority of buyers have bought the target asset and there are no new buyers to support the uptrend. If sell orders pile up and there is no one to buy them, cryptocurrency prices will gradually decline. Therefore, the supply pressure of this asset in the market increases and the cryptocurrency prices enter the correction phase. Therefore, the correction of the digital currency market is also called the market rest period.
In other words, the majority of buyers have bought the desired digital currency and there is no new applicant to support the upward trend of the market. As a result, the sales orders of this asset are accumulated and the cryptocurrency price decreases, in other words, it undergoes correction.
Bitcoin price correction can also happen under the influence of small events; But at first, it starts with technical factors such as buyers entering strong resistance levels, trading volume unloading, and the difference between the cryptocurrency price direction and indicators such as the relative strength index (RSI) that measure its momentum.
Types of the market correction
Market analysis charts have two dimensions, price and time, each of which can be changed. According to this, there are two types of corrections in the currency market: time and price.
When the cryptocurrency price undergoes significant changes (price reduction) in a short period, a price correction has occurred. If for a long period, the trend of cryptocurrency price reduction is not significant, a time correction occurs. In other words, the market participants of this currency suffer from capital stagnation and the price does not change significantly for a certain period. In this case, it is said that a time correction has happened.
Note that we often consider the main wave of the chart to be bullish, which is corrected by the occurrence of bearish sub-waves. But in general, the emergence of ascending sub-waves in a general downward trend can also be considered a correction.
Types of the technical market correction
In terms of technical science, digital currency market correction includes three types simple, complex and ABC correction.
Simple correction: This type of correction consists of only one wave, the Fibonacci correction technique can be used to identify its end.
Complex correction: These corrections have more than three waves, where the peaks and valleys of the chart are in different positions relative to each other.
ABC Correction: There is another type of correction that includes exactly three waves. This modification, called ABC, has a recognizable finish. In this way, when the cryptocurrency price at point C of the chart moves in the opposite direction and reaches the (horizontal) range of point B, the correction ends.
The difference between modification and pullback
A pullback is a sign of the emergence of a wave opposite to the main wave, but it is short, temporary and partial; after which the cryptocurrency price continues its upward or downward trend.
In other words, it can be said that a pullback is a sign of the market’s readiness to continue its upward or downward trend with the same strength that has undergone a slight change (5 to 10%) in a short period against the main trend of the chart. The chart of changes in market cryptocurrency price-time has ups and downs and resistance and support levels, when these levels are broken into an upward or downward trend, the chart retreats and the main market trend resumes. When the cryptocurrency price enters the corrective phase, the resistance lines (in the upward trend) become support and the support lines (in the downward trend) become resistance.
The relationship between high volatility and cryptocurrency price correction
If the demand to buy a digital currency is more than its supply, its cryptocurrency price will go up, and if the supply is more than the demand, the cryptocurrency price will fall. These ups and downs in the digital currency market cause fluctuations in the market. In fact, upon reaching the cryptocurrency price ceiling, the correction market occurs and the cryptocurrency price decreases, and upon reaching the cryptocurrency price floor, the correction leads to its increase. The more volatile the market, the more possibility of price correction because the rapid movement of the price does not allow buyers and sellers to place orders. For this reason, the cryptocurrency price retreats from its dominant upward or downward trend and allows traders to place orders.
Does correction mean the beginning of a bear market?
Before answering this question, we first examine the concept of a bear market. A bear market indicates that the market has entered a downward trend. So that the property in question suffers a cryptocurrency price drop of more than 20%. This usually happens as a result of an economic recession; due to low demand and lack of buyers, cryptocurrency prices will decrease.
Some people mistakenly equate a bear market with a correction. This is while in the correction process, the change process is short-term and usually within one to two months, after a peak of 10 to 20 per cent, the cryptocurrency prices retreat. This period is a good opportunity for investors to enter the currency market, but there is no such opportunity in a bear market and it is difficult to compensate for losses.
What is the best move during a cryptocurrency price correction?
Usually, in the financial markets, after the correction, cryptocurrency prices enter the path of growth. But what is important is the value of that asset. If the desired digital currency is worth buying in the crypto market, according to the analysis of experts and activists in this field, investing and buying cryptocurrency is the best move.
In general, predicting the future of the desired currency and recognizing the end of the correction phase are two very important points that can be understood with the help of technical analysis as to what is the best move during the correction of the digital currency market. Sometimes, due to a lack of knowledge and impatience, people act impulsively and sell their property with the lowest cryptocurrency price drop.
How long will the digital currency reform last?
A group of traders, who are considered capital market giants, play a role in entering the correction phase and ending it. In other words, these people shape the market trend through supply and demand at a specific time. So that after obtaining huge profits, they come out of the role of the applicant and by offering their assets, they enter the market into the correction phase. This means that cryptocurrency prices will decrease and sales will increase. Then he buys currency again and the correction period ends. As a result, the market goes up again.
By using different methods of technical analysis, the end of correction can be detected. Professional traders take advantage of this situation them.
The digital currency market is accompanied by ups and downs that are formed following the supply and demand of the big players and crypto market players. A digital currency market correction also generally shows a cryptocurrency price reduction in an upward trend. This concept is different from the market crash and is short-term. So that it creates a suitable situation for investment and buying currency. However, some people get worried and anxious during the market correction, and by selling their assets, they leave the market of that digital currency and go to another market. There are different forms of correction that can be analyzed to make the best use of this situation.
High volatility of digital currencies
Bitcoin is known to be a highly volatile asset. This means that its cryptocurrency price fluctuates significantly in short-term periods compared to other assets. That is why some traditional investors, including Warren Buffet and Carl Icahn, consider it a risky investment.
According to recent data, the one-year volatility of Bitcoin shows 32.7%; Which has a significant difference from the most volatile assets after it, such as oil (with a volatility of 18.8%), the US stock market (with a volatility of 8.41%) and real estate of the United States (with a volatility of 7.15%).
Although high volatility has its advantages, especially during bullish cycles when cryptocurrency prices rise dramatically, it also means frequent price crashes and corrections.
From January 1, 2021 (12D99) to the end of April, Bitcoin has experienced 7 significant cryptocurrency price changes on its daily trading chart against the US dollar. Four of these movements were downward with an average drop of 25.94% (red boxes) and the other three were upward with an average increase of 58.36% (blue boxes).
Knowing which downtrends are “falling” and which are “correcting” will help you better understand the market and how Bitcoin traders react to certain fundamental and technical factors.
Sometimes a fall can be a predictor of a bear market and a long period of cryptocurrency price stagnation, But price corrections can be seen as a sign of a healthy upward movement towards its support level; While the price will try again to break its previous peak after this correction.
So the next time you see a drop in the cryptocurrency price of Bitcoin, you should be able to tell if it’s a correction or a crash; and whether the market is experiencing a healthy recovery period, or reacting to a piece of news or sudden event.