Lots of volatility in the cryptocurrency market within the past 24 hours.
“What the heck is happening?!” you might be wondering.
You’ll get whiplash just from watching.
Throughout the day yesterday, bitcoin plunged faster than Snoop Dogg could say “Drop It Like It’s Hot”.
From its peak of $19,900 earlier this week, bitcoin has dipped as low as $12,121. That’s almost a 40% drop.
Here’s a chart from WorldCoinIndex:
Welcome to the roller coaster world of cryptocurrencies.
This past summer, we had to stomach a 50% drop of the entire market.
No need to panic.
Keep calm, take a deep breath, stop watching the prices, step away from the screen and in the words of Q-Tip….”Let’s ride.”
Let’s ride out the volatility.
It’s hard to nail down the exact cause of this selloff.
There is a lot of talk of how traders are just “rotating” from bitcoin to “alternative coins” or altcoins, but these altcoins are falling as well.
Ripple (XRP) is down 35% ether (ETH) is down 32%, litecoin (LTC) is down 34%, IOTA (MIOTA) is down 44%.
Lots of red today. Basically, a crash across the crypto board.
The most reasonable cause is due to what happened to Youbit. The South Korean exchange was hacked earlier this week.
The thieves made off with almost 20% of its assets. They’re probably the ones liquidating their stolen goods right now.
And in a low liquidity market like cryptocurrencies, it’s very difficult to cash out without crashing the price.
Especially if sellers aren’t too concerned about what price they cash out.
Nobody knows how long this volatility will last. But pullbacks are healthy.
Pullbacks or trend retracements set the stage for the next rally by flushing out the weak hands.
Weak hands are people who tend to be easily spooked by price changes, and they often tend to buy at the top and sell at the bottom.
During a pullback, while the weak hands are freaking out, the strong hands are happily taking advantage and buying from them.
Strong hands are the people buying on the pullback because they have done their homework and believe the selloff is temporary.
Once the weak hands are finished selling, prices resume their uptrend because all the weak hands have been shaken out so there are no more weak hands to sell to.
Despite the recent selloff, I’m confident that the cryptocurrency market is here to stay.
It is growing market, not a dying one. And as all parents with teenage kids know…with growth comes volatility.
When appropriate, use this volatility as an opportunity to buy bitcoin or other cryptocurrencies you don’t yet own at reduced prices.