How much more is the crypto market going to drop and will it recover?

There has been plenty of news about the crypto market crashing in the past few weeks, and it’s been an overall emotional roller coaster ride if you’re invested in any form of cryptocurrency. The question on everyone’s mind is whether the crypto market will recover or continue to drop.

While no one can say definitively how much more it will drop, or how long this downtrend will last, there are some things we can look at that may help us get an idea of what’s going on with the market and what we can expect going forward.

 

The difference between a bear market, correction, and crash

While most financial experts use those three terms interchangeably, there are some distinctions that are worth noting. A bear market has a downward trend of 20% or more from a peak (market high).

Corrections, on the other hand, are typically 10-20%. And crashes fall somewhere in between. Depending on where you live and your experience with past downturns, there’s probably no one definition that is universally accepted when it comes to bitcoin price fluctuations.

It’s also important to note that crashes can be quite long -– like in 2008-2009. In fact, even after reaching its low point during that time period, it took nearly two years for bitcoin prices to fully recover. Given how volatile these markets are, predicting future movements isn’t easy.

Still, here are some potential explanations for why we might see further declines over the next few months There’s too much uncertainty surrounding regulation: If we learned anything from 2018, it’s that investors don't have any clue what's coming next in terms of regulation.

For example, China recently made headlines by declaring an end to ICO fundraising and suspending cryptocurrency exchanges altogether -- but just days later officials announced they were looking into developing their own digital currency.

So far, regulatory moves around cryptocurrencies have been all over the map. This could make institutional investors wary about entering the space until they get a better sense of what's coming down the pipeline.

 

The recent cryptocurrency correction

The cryptocurrency correction that occurred in 2018 has been unprecedented in its severity. Bitcoin, for example, dropped a massive value since its all-time high of $20,000 (or 1 BTC for $19,000) on December 17th, 2017.

At today’s current exchange rate of $7,500 per coin and an approximately 16% correction from peak values (as of 10/31/2018), bitcoin investors have lost about $13 billion USD worth of value from their investment in less than a year.

Not surprisingly, many crypto markets haven’t fared any better: Ethereum has lost around 66% of its peak value; Ripple dropped 78%; Bitcoin Cash fell 75%. The list goes on - these are by no means exceptions. Many cryptocurrencies have fallen 90% or more from their highs.

There’s little doubt that cryptocurrencies have become one of 2018’s most volatile asset classes, but what does history tell us about how far they might fall before recovery?

 

What caused this correction?

In a word, fear. The price of Bitcoin (BTC) dropped 10% on Friday following news that South Korea’s government was looking into banning cryptocurrencies, while China plans to block domestic access to Chinese and offshore cryptocurrency platforms that allow centralized trading.

Specifically, South Korea is looking at a bill that would ban using anonymous bank accounts in buying digital currencies—something investors have been doing in order to skirt government currency controls. Plus, China banned initial coin offerings last week.

This follows bans on cryptocurrency exchanges in both countries. So while they’re not exactly sure what caused the correction, investors are panicking just thinking about what governments might do next... sending prices down even further until we reach equilibrium.

For example, if BTC drops 50%, it could mean that $5,000 becomes the new $10,000. And if you’ve been sitting on your hands for weeks watching your portfolio plummet in value like many traders have done over recent months... now may be a good time to buy!

But don't go crazy! Don't invest more than you can afford to lose. Just because there's blood in the streets doesn't mean you should jump right back into these markets without careful consideration.

It's important to remember: corrections happen often and they're normal... especially after such an incredible bull run. If anything, corrections give us a chance to re-evaluate our investments before making any drastic changes.

 

The recovery from this correction

You may not see a recovery soon. Many people think we are at least close to a bottom right now, but some prominent experts predict an even deeper correction.

To get an idea of what a long-term bear market looks like, take a look at Bitcoin’s price history from 2013-to 2015 (see below). After hitting nearly $1,200 in late 2013, Bitcoin plummeted over 75% by early 2015.

And remember, those were heady days for cryptocurrencies; when you compare them to today’s prices, it seems almost impossible that they could have been worth so much less just three years ago. The good news is that after bottoming out at around $150 in 2015, Bitcoin started another bull run and hasn’t looked back since.

But there are many who believe we are due for another major correction any day now—and if you don't want to watch your money disappear into thin air again, then you should be prepared for one as well.

 

Conclusion

The Crypto Market could drop even further with no rebound in sight. This fall, combined with regulatory concerns and high competition has made it extremely difficult for companies to attract capital or even keep their value.

Many experts have predicted that Crypto’s widespread adoption has stalled out and they are now moving into a period of stagnation. While there is still a chance for recovery, don’t expect a huge increase in cryptocurrencies until companies can bring revenue to back up their work.

One company that could be on its way back up, however, is Overstock which recently posted sales numbers at almost double what they were last year.

The company has seen huge success because of its acceptance of cryptocurrency as payment for its products which helped them gain traction in 2017 when other companies struggled to stay afloat.