After months of new all time highs, the cryptocurrency market took a beating yesterday. Ethereum fell the most, dropping over 20% but there were red numbers all around. Bitcoin also dropped about 10% and dragged most of the altcoins with it.

There was an anxious feel over the cryptocurrency community and a lot of people were questioning whether it was a good time to sell, hold or buy. As always with cryptocurrencies, the market is very volatile and highly unpredictable in the short term.

A regular price correction

This is a price correction, after a huge rush like the one we have seen this spring, some new investors expect to see 100% price increases each month. This is of course not sustainable, and price corrections are necessary. Looking back on the bitcoin / $-price over the years, it is easy to spot a similar trend.

Bitcoin price over the years

Similarly the stock market also has price corrections. Usually those come in the form of economic recessions about every 8 years. The cryptocurrency market works a lot faster so there is a shorter time period between booms and recessions.

It is unclear whether the price correction has ended. We might see further drops, or we might not. A lot of new investors attempt to predict “bear traps” or “bull runs” and time their investments. Those techniques are questionable at best in the stock market, and in my opinion completely useless for cryptocurrencies.

Advice to new investors

My advice to new investors is to educate yourself and invest an amount you are comfortable losing in currencies you believe have long term potential. Do not worry about everyday swings of the Bitcoin or Ethereum price, because there will be a lot of them. Daytrading opens you up for making mistakes, and you are likely going to lose money if you haven’t successfully invested in other markets previously.


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