A significant correction in the crypto market after a period of gains or continued volatility is likely to be a sign of a healthy correction.
Price bubble release: Previously, the crypto market often experienced over-hyping, and the prices of various assets were rapidly pushed up, including some projects that lacked actual value support. For example, some air coins could rise to very high prices just by relying on concepts and market enthusiasm. When the market ushers in a correction, these bubble components will be squeezed out, and prices will gradually return to a relatively more reasonable range that better reflects their true value, making the entire market healthier and more rational.
Technical adjustment: From the perspective of technical analysis, whether it is Bitcoin or other mainstream crypto assets, their price trends often accumulate too many overbought signals in the long-term rise, and various technical indicators show that they need certain adjustments to repair. For example, after the relative strength index (RSI) has been in the overbought area for a long time, the price correction can allow the indicator to return to a reasonable range, laying the foundation for further stable trends in the future.
Cooling of market sentiment: During the crazy market rise, investors tend to be overly optimistic and blindly follow the trend, and the callback can calm down this overheated sentiment. New investors can take this opportunity to better understand the risks and operating mechanisms of the crypto market. For the entire market ecosystem, it is beneficial for participants to become more rational to achieve long-term stable development.
Entry strategy
If you think it is a signal of a healthy correction, you can consider taking the opportunity to enter the market. However, you need to make adequate plans, such as adopting a strategy of buying in batches. Taking Bitcoin as an example, you can first take out one-third of the planned investment funds to buy in the current correction stage, and then gradually increase investment according to the price trend. If it continues to pull back and reaches the key support level you set (such as the key points of the Fibonacci retracement line that have been verified to be effective many times before). At the same time, choose some crypto assets with solid fundamentals, such as Ethereum, which has a strong ecological support and many applications running on its network. Enter the market during the correction, and in the long run, it is expected to obtain better returns when the market resumes its upward trend.
