The price of the first cryptocurrency has grown by a third since the beginning of October. Experts have named factors that in the near future can provoke a correction in the crypto market
In October, the bitcoin rate recovered after the collapse of quotations that occurred on September 7. Then the price of the first cryptocurrency per day decreased by 16% (from $ 52.9 thousand to $ 42.8 thousand). Since the beginning of October, the cost of bitcoin has grown by a third and exceeded $ 57.8 thousand. Topplabs.org experts explained what signs may indicate the possibility of another market collapse and how to recognize them.
Greed and fear
To recognize the approach of a powerful correction, it is necessary to monitor a number of different indicators, explained the head of the analytical department at AMarkets Artem Deev. He advised to closely monitor all the news regarding the crypto market, because different events may cause strong movements (fall or rise in prices).
As an example, the analyst cited the introduction of restrictions on cryptocurrencies in China, which took place in the spring. According to him, after the bans in the PRC, the index of "fear and greed" fell sharply to the level of "extreme fear", which caused a massive influx of cryptocurrency to exchanges for the purpose of selling. In mid-May, the bitcoin rate sharply decreased by a third during the day and for the first time since January dropped to $ 30 thousand.
“You always need to track the entire chain: news, market movements, the fear and greed index,” Deev said.
Weakening trend
The index of fear and greed, as well as large movements of the cryptocurrency must be monitored, but it is almost impossible to interpret them accurately, says Dmitry Machikhin, CEO of the investment fund Pressman Capital. He recommended treating these indicators with caution and primarily focusing on technical analysis.
According to Machikhin, large price rollbacks always follow a clear trend weakening. Experienced market participants in such situations say that the bulls are exhausted, the expert explained. In his opinion, if there is a clear weakening of the uptrend in the market, then it is better to fix some of the positions in profit in order to confidently wait out the correction.
During a market collapse, it is definitely not worth closing all positions, says the head of the analytical department at AMarkets. In his opinion, part of the funds should be left in Bitcoin and Ethereum, since after a decrease they will go up.
“A period of decline is always followed by a stage of growth, and on a decline, you can successfully purchase assets that were previously more expensive. It is better to open new positions at the stage of maximum decline, because from the bottom point the subsequent growth will be the largest, "Deev noted.
What's going on now
At the moment, there is “greed” on the market, but this period may soon end, Deev says. According to him, the situation will depend on the news background.
"If suddenly there is some negative for the market – for example, the news that mining is being restricted in different countries against the background of the energy crisis, this will certainly lead to a powerful correction," the analyst explained.
In the event of a serious negative, the cost of bitcoin could drop sharply by 15-20% within a few days, Deev predicted.