It has truly been a bloodbath in cryptos the past week. Bitcoin dropped below $10k. Litecoin traded in the mid 100’s. Ethereum dropped down to the 700’s. This is the first time we have seen the leading cryptocurrencies have a multi-day drop of this magnitude. We have seen big drops in these names before, but this is the first time we have seen them dip for longer than 24 hours. They have had a multi-day landslide. These drops are scary, but they are actually great for traders, and even long-term holders. Here's why.
When you have a 50% drop in any asset class, you're going to see some amazing range in the following days. This is great for day and swing traders in the cryptocurrency space. More volatility means there will be more range to capture. It also means you can capture bigger moves in a shorter period of time. During these periods, after these huge drops, it is very possible to capture a 20% or greater move in under an hour if you time your entry correctly. Check out this video to learn more about why cryptocurrency traders should love these drops:
Corrections Are Healthy For Longer Term Trend
All of the major cryptocurrencies are up 1000s of percent in 2017. A correction like this is actually good for the longer term trend. We have used the sprinter analogy before to describe cryptocurrencies. What Bitcoin, Ethereum, and many other cryptocurrencies did is the equivalent to a sprinter running for 1 mile straight without taking any breaks. In order for the sprinter to keep running, he or she needs to take a rest. These large pullbacks are the rest these cryptocurrencies need in order to continue their uptrend.
Buying Opportunity For People That Missed Out
Buying Bitcoin at 19k had horrible risk reward. Likewise with Ethereum at 1400. Now that they both have retraced almost 50%, it presents a great buying opportunity with much better risk versus reward. All of these cryptocurrencies have repeatedly been bought up after dips like these, so it is a very high probability they will get bought up again. You don’t need to get FOMO when you see cryptocurrencies making big moves, because they will almost always retrace at some point and test prior breakout level.
Know When To Stay In Cash
During big crashes like this, it is crucial to remain in cash until the bottom is confirmed. When there are crashes as big as this, you don’t need to pick the exact bottom to make good money on the bounce. Even if you bought Ethereum at 900, over 100 points off the bottom of the recent crash, you still would’ve made good money on the bounce.
If you want to learn how to trade cryptocurrencies and take advantage of all these great opportunities we are seeing click here.