What Is a Correction?
A correction is defined as a rapid decline of at least 10% in the price of an asset from its recent peak. The term “correction” is used because it typically brings the price back to its long-term established trend after an abnormal surge.
Corrections are often followed by recoveries, but they can also lead to extended periods of decline known as bear markets, where prices may drop by 20% or more. For example, Charles Schwab, a financial services company, documented 24 corrections in the S&P 500 stock market index between November 1974 and February 2020, with only five resulting in bear markets.
In the cryptocurrency market, corrections of 5-10% occur more frequently compared to the stock and other traditional markets due to the high volatility of cryptocurrencies. However, these corrections are usually balanced out by frequent recoveries, and the overall trend of most major coins since the market’s inception in 2009 has been bullish.
For instance, Bitcoin’s (BTC) price has experienced significant growth, increasing from $0.003 per coin in 2010 to over $19,000 in 2020, despite encountering corrections of up to 50% in a single day.
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Correction
What Is a Correction?
A correction is defined as a rapid decline of at least 10% in the price of an asset from its recent peak. The term “correction” is used because it typically brings the price back to its long-term established trend after an abnormal surge.
Corrections are often followed by recoveries, but they can also lead to extended periods of decline known as bear markets, where prices may drop by 20% or more. For example, Charles Schwab, a financial services company, documented 24 corrections in the S&P 500 stock market index between November 1974 and February 2020, with only five resulting in bear markets.
In the cryptocurrency market, corrections of 5-10% occur more frequently compared to the stock and other traditional markets due to the high volatility of cryptocurrencies. However, these corrections are usually balanced out by frequent recoveries, and the overall trend of most major coins since the market’s inception in 2009 has been bullish.
For instance, Bitcoin’s (BTC) price has experienced significant growth, increasing from $0.003 per coin in 2010 to over $19,000 in 2020, despite encountering corrections of up to 50% in a single day.
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