What Must Crypto Traders Keep Track Of During Correction?

The unpredictability of crypto price movements makes it difficult for both long-term HODLers and short-term traders to keep their wits about them when prices drop off a cliff. Regardless of the cryptocurrency, you are trading in, you find yourself in a precarious position. Notably, the price of Bitcoin can adversely affect altcoins as well.

Anyone trading in the current market needs to comprehend how the currency’s recent price action has impacted its investors. Understanding the current market sentiment and establishing the right time frame to review an asset’s performance are two keys to success.

When a digital coin takes a dip, some of the holders will certainly take a loss. The Short Term Holder (STH) SOPR metric becomes important in this scenario. SOPR tracks the amount of profit ( 1.0) or loss ( 1.0) garnered by the currency on-chain. It considers only new entrants holding currencies for less than 155 days.

As for a long-term investment, the scenario becomes quite different. Post correction, when the market evolves, favorable conditions may emerge yet again. Generally, corrections don’t negatively affect long-term investors, as long as pricing trends on longer time frames such as daily charts are not broken.

In the case of long-term holders of coins, be they Bitcoin maximalists or institutions, there are very few instances of panic selling. They tend to hold on to their coins. The higher the number of long-term holders, the more they help to alleviate bearish pressure on the currency, simply through the mechanics of limiting supply in the face of greater demand.

Metrics like Coin Days Destroyed and Dormancy also provides greater insights into the market. The Coin Days Destroyed metric provides a tool to measure economic activity, giving more importance to digital assets that haven’t been moved for a considerable time. Dormancy is another metric that indicates the average number of days each spent unit of currency remained dormant before any movement.

When long-term holders of a cryptocurrency continue to make frequent sell-offs, the coin may witness a delayed continuation of its uptrend.

Leave a Reply

Your email address will not be published.

Related Articles
Read More

Bitcoin and Ethereum Indices Debut on S&P Dow Jones

This is a massive step in the right direction that will contribute to the mass adoption of cryptocurrencies, and because of that, I see this as a very exciting development. The first of the three crypto indices will, of course, be tied to Bitcoin (SPBTC)....
Read More

What Are Options, Futures, and Perpetual Contracts?

These similarities border on price volatilities as well as the integration of investment or trading systems or provisions that exist in traditional financial systems and the broader stock market. Part of the investment contracts that are attached to traditional commodities including Options, Futures, and Perpetual...
Read More

What Is Automated Trading, And Can You Make Money From Using It?

What is Automated Trading?Automated trading in crypto involves letting bots and algorithms make trades for you. These programs will automatically buy and sell different cryptocurrencies without you physically being on your computer or phone. It’s easy, right? Well, you need to know how to set...