The recent 28% drop in Bitcoin has been a rollercoaster ride for some first-time buyers.
Known for its volatility, Bitcoin (BTC) recently experienced a drop of more than USD 11,000 in a four-day period after weeks of upward price action. In the midst of a new bullish cycle, Bitcoin has likely picked up its fair share of new buyers, some of whom may not be too familiar with the wild swings in asset prices, according to comments from Cheds, a cryptomoney trader and analyst on Twitter. Cheds has a CMT Level I certification, a benchmark that shows his knowledge of technical analysis.
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„Given the recent surge in Bitcoin’s popularity, we have a lot of new investors and traders who haven’t been through any shocking events, like that $8.50 daily candle we just had,“ Cheds told Cointelegraph.
Bitcoin surpassed its 2017 record high in December 2020. In the following weeks, the cryptoactive doubled from its previous high of nearly $20,000, almost reaching $42,000 on January 8, according to TradingView.com. This is probably due in part to the big players in traditional finance buying Bitcoin in the second half of 2020. Metrics from the crypto currency data site, The Tie, suggest that recent retail investor money flow may also be a contributing factor to this trend.
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„True believers and really anyone who understands the imbalance between supply and demand love these volatile events because it allows them to re-enter or add to previous positions,“ Cheds explained.
„As long as the institutional buildup continues to increase and the daily active trade float continues to decline, Bitcoin’s bullish bias should continue and, in my opinion, all the falls should be bought.
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Other industry participants have noted that Bitcoin crashes are common and point to the recent correction to help guide expectations.
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Although Bitcoin has historically been synonymous with significant price swings, its gains of over $20,000 have opened the door to greater dollar swings.