Investors should diversify into crypto projects that show strength during market correction
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Volatility is one of the most distinctive characteristics of the cryptocurrency markets. But for new market participants, for investors or traders who have recently joined the bandwagon, volatility can be worrisome. Since last night, Bitcoin (BTC) has undergone a sharp correction of 7% to below $42,000, the lowest in more than a month now. In this article, we are going to do a brief analysis of what caused the decline of Bitcoin and its impact on the cryptocurrency market.
This is not new to Bitcoin
Bitcoin has been the top performing asset of the decade due to its skyrocketing price. It went from $1 in 2010 to $69,000 in 2021. Any asset with such strong price gains is likely to experience choppy periods extending along the way and BTC is no exception. In fact, volatility is the main factor that allows the first market participants to make good profits.
In 2021, BTC had two periods of 30% + retracement in May and November. But BTC made Pooh’s comeback by first entering an accumulation phase (low volume) followed by a breakout phase (high volume) surpassing previous all-time highs.
Right when BTC was expected to bounce off the bottom of its one-month trading range, it crashed below the $43,000 level. This price movement is expected to be caused by the US Federal Reserve’s statements on balance sheet control and interest rate increases in 2022. The broader financial markets, including the Nasdaq and S&P 500, reacted, leading to a strong reaction in the currency markets. also encrypted.
Ethereum (ETH) failed to show strength against the broader market sentiment, succumbed to selling pressure and lost the crucial $3,500 level to the bears yesterday. ETH has found strong support near the $3,330 level, however it is trading just above $3,300 due to high volatility. ETH will enjoy the support from the $3000 area if it slides further, while to resume the uptrend, the $3500 must drop first and $3800 later. Ethereum is currently down 12% over the past day and is likely to see further declines if BTC underperforms.
Altcoins are bleeding
With BTC and ETH under fire, the entire market was painted red with strong performers such as Solana (SOL), Polygon (MATIC), and Terra (LUNA) losing more than 11% from the day before. While these liquidation events are unexpected and inevitable, there are ways to strengthen one’s portfolio during those times. For example, some projects have done well against the bitcoin and ethereum price drops today. Pullbacks for Stellar (XLM), Fantom (FTM) and Near Protocol (NEAR) were moderate today (<7%), due to strong moats like Total Value Locked (TVL), fund allocations etc. Analysts expect a strong price rebound In such projects once the bullish trend in BTC resumes.
Therefore, investors will do well to spread their investments through strategic diversification of their portfolio within cryptocurrencies and in general as well. And always remember that Bitcoin has been trending over time since its inception. These dips are an ideal entry point for the seasoned investor.
Disclaimer: This article was written by Giottus Cryptocurrency Exchange as part of a paid partnership with The News Minute. Crypto-asset or crypto-currency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your research before investing and seek independent legal/financial advice if you are unsure about investments.