اصلاح بازار: تئوری و عمل
مقاله از تیم exmo
نرخ بیت کوین در طول تاریخ آن تغییر می کند:
سپتامبر 2010 از 0.175 دلار به 0.061 دلار (65 درصد)
ژوئن-نوامبر 2011 از 32 دلار به 2.3 دلار (93 درصد!!! کاهش)
آوریل 2013 از 266 دلار به 54 دلار (79 درصد)
دسامبر 2017- ژانویه 2018 از 19500 به 6800 (65درصد)
تحت رشدهای گنده، کارکشن های گنده هم اجتناب ناپذیره که طی اون تمام ارزهای رمزنهاد ارزون میشن . مثل اتفافی که در ژانویه 2018 افتاد
Market correction: theory and practice
How does correction on the exchange evolve and develop?
The matter is that the latest too rapid cryptocurrency growth did inspire much the investors. The more reputable cryptocurrencies were going up by milliards of dollars, while the less reputable and capitalized could have gone up by several times in a day. Some investors, who have purchased bitcoin, or any other cryptocurrency for the first time, thought this runaway to be lasting forever.
However, according to a well-established market rule, there cannot be any lasting cryptocurrency growth. The pricing drop and reversion, at least, partial are always coming after the too rapid growth. It is generally called a correction or rollback, and successfully applied both on the cryptocurrency exchanges, and traditional markets. It also works for the cryptocurrency rates and crypto-market in whole, especially, when the market is “overheated” by the massive investing and inflated expectations.
Though market correction is likely to bring some risks and uncertainty, it also brings new opportunities for those users, who are ambitious enough to keep going led by a specific strategy. So, let’s have a look at the factors inducing market correction and how it affects the effectiveness of the cryptocurrency exchanges.
What is correction on the exchange?
Pricing is rapidly going up on the crypto-market from time to time. We have previously discussed
why cryptocurrency rate was changing. This event is also usually called a ‘pump’. For example, bitcoin rate went up by almost four times during the period of the beginning of November to the mid of December 2017.
A lot of investors including the least experienced believe that it is a great idea to buy up the growing cryptocurrency in hopes to make a good deal. Depending on the duration and force of a pump, such an opportunity can last either for quite a short period of time, or vice versa. In any case, the cryptocurrency continuous increase cannot be lasting forever. All in all, the marker position (namely, overbought value) will finally stop contributing to the further pump. That is when the correction comes.
The correction causes do certainly vary. For example, the negative news including prohibitions, hack-attacks, and difficulties in the work of the crypto-platforms can cause a correction. Thus, bitcoin fall in September 2017 was linked with the restrictions put on the work of the major exchanges in China as well as the prohibition of ICO in this country. Moreover, among the causes of the latest fall in January could also include a prohibition of the new registrations on some big bitcoin-exchanges. Nevertheless, the changes in the demand and supply are usually called the most significant causes of the market correction.
That is how the process is described - when the number of traders willing to sell the cryptocurrency that has gone up in price is becoming too big and the number of fiat owners willing to buy it becomes too little due to the overprice, then the pump will slow down. However, when the crypto-holders find out that a number of the traders willing to buy crypto at such high prices is going rapidly down, then the active sales, and pricing quick decrease will take place on the cryptocurrency exchanges.
Bitcoin rate shifts throughout its history:
September 2010 - from $0,175 to $0,061 (65%);
June – November 2011 - from $32 to $2,3 (93%);
January – February 2012 - from $7,2 to $4,3 (40%);
April 2013 - from $266 to $54 (79%);
November – December 2013 - from $1151 to $576 (50%);
November 2014 - January 2015 - from $407 to $177 (56%);
June – August 2016 - from $744 to $515 (31%);
September 2017 - from $4750 to $3638 (23%);
December 2017 - January 2018 - from $19500 to $6800 (65%).
Graph 1 demonstrates bitcoin rate dynamics for 2013-2018. As we see bitcoin has been experiencing a lot of corrections throughout its history. One of these corrections is still lasting from the mid January 2018.
Those traders, who have bought up assets at the prices close to the “peak” without having a deep understanding of the market situation will hold the worst positions. The matter is whenever the correction turns to be “effective”, not short-term, the price will drop and be down for a long time. The careless investors will have to sell the assets at the prices much lower than the initial cost was, or passively keep the assets in cryptocurrency waiting for the future massive increase. A trader needs to remember that the date of this increase is highly undetermined. Furthermore, whenever the investing potential of the asset is low, there is likelihood that the increase won’t happen at all.
Learn more about how to evaluate the investing potential of the asset in the article
“Bitcoin vs Altcoins”.
The market situation analysis is always complicated with the numerous pricing depressions starting from the smallest ones lasting for a few minutes only. A one and the same price drop (for example, of a few cents) can be both a local price collapse (with a further slight recover), and initiation of the major correction. The correction can last for many days and even weeks contributing to the large-scale price decrease. The rate drops down by tens and hundreds times are pretty typical for the poorly-capitalized coins. That is why the “real” correction can be missed. Even an inexperienced trader can acknowledge the actuality of the correction much later than its early stage ends.
A trader can understand that the real correction has happened judging on the trends and
lines of support. Along with that, there is likelihood of the “fake” breakdown. The EXMO experts have oftentimes repeated that the market situation have to be approached in its entirety. A trader should not solely rely on the small-scale technical analysis of a couple of graphs.
Though, depending on the initial market conditions and intensity of the efforts made by the major players, correction can become more or less heavy including “dump waves”, it is never endless. Usually, the trend shift and the correction bounce are quite dynamic. The subsequent pricing changes and overall market activity are going down gradually. The bounce may end up with a kind of quite feeble and poorly efficient “bounce correction”.
A long-term flat, or as it is also called market consolidation usually follows a period of the correction, and bounce.
Trading consolidation is thought to be a time for roll-up and preparation for the new market movements. Another increase can come after the consolidation (flat). It may take some time, usually quite a long period. However, if the increase does actually occur, it can lead a coin to the new price peaks exceeding the peaks under the last pump. Finally, If the particular asset market overbought is preserved, another correction is also possible.
Graph 2 demonstrates an example of a flat (market consolidation).
Bitcoin price did not change much from 9 to 16 January 2018. It is quite surprising as the limited correction could have been seen on the market before. Later, another correction has evolved.
How does correction affect performance of traders and investors?
The way how correction affects trading profit (and trading specific character, in general) considerably varies for the investors and traders. The investors may strive to guess right a price peak before correction, and “bottom” of its final to do the overbought. The traders are able to strive to make even greater profit from the risky trading with less turnover periods.
Under the effective application, the first variant is quite perspective. However, the second variant is even more perspective. In this case, the rate volatility, which is quite significant under the correction despite of the overall pricing decrease tendency, becomes the main profit source. Here it would essential to mention that the decrease does not steadily flow suggesting the periodical rate whips up.
In any case trading correction complicates the way traders get profit. The matter is that the buying price, which has been previously estimated as “intermediate”, usually turns to be higher than the upcoming prices in the situation of the steady price decline. The newcomer traders are the most susceptible under the correction. Whether they know evaluating the market entry points are right or not does not change the situation, especially under the fact that no rate growth neutralizes their mistakes.
In most cases, traders are managing their activities on the market using various trading strategies. The idea of this strategies is the following. It is essential to buy the asset at the cheaper price, and sell it at the more expensive price. Trading on the fall is another topic under correction. Such trading can be applied under condition there is
margin crediting on the platform. On the one hand, the general pricing direction induces the use of the following strategy - make a loan - sale - buy at a cheaper price - redeem a loan. On the other, the unexpected and severe pricing movements to the “wrong” side are typical under correction, making the situation unfavorable for a trader exercising margin crediting with big leverage.
Current cryptocurrency market and correction
Though we have previously discussed the correction on the example of a growth and decline of the cryptocurrency price, correction on the exchanges can go wider.
If the crypto-market is being largely invested in short time due to the increase in the number of investors and speculators’ efforts, then, the rapid growth on the particular coins becomes quite a regular event. Along with that, if the frequent corrections after another growth of that or that one cryptocurrency do not lead to the durable pricing depressions, then, the “rested” coin start rising soon again. The described market situation could have been seen in the latest months of 2017.
Under the massive growth, which is described above, the massive correction is also inevitable, during which almost all cryptos are cheapening. The cheapening is not always equal and simultaneous. Such correction happened in January 2018, under which the bitcoin cheapening weighted down the rate of many altcoins. Under
the cryptocurrency market capitalization analysis, EXMO experts considered the causes why bitcoin rate tendencies affect altcoins.
Contrary to the common practice, the decision of the investors to move from the cheapening currencies to the currencies still holding their positions did not contribute to their growth because of the pressure and built up capitalization seriously affected these currencies as well. As a result, the prices of almost all crypto-coins were going down.
At the time of the article preparation, another correction wave was damping and getting into flat. We will further see whether this wave was the last. All in all, comparing to the maximum prices in the beginning of January the market prices are still too low. Reflecting on the above, it is possible to suggest that the correction is good for the investors and traders, creating the opportunities to buy up or entry the crypto-market at a new, more favorable price.