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Correction time: Bitcoin price fell, but returned to $ 50K the day after

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The last week of February didn’t start very well for cryptocurrency traders.  The bitcoin rate on February 23 drops below $ 46,000, and ETH dropped to $ 1,400. Most top coins have fallen in price by more than 10% over the past day. After a week of records, it was time for a major correction. It is not yet known whether the correction will end in the coming days or continue. Against this background, the volume of liquidations of positions in the derivatives market amounted to more than $ 5 billion – a record figure this year. Most liquidations occurred on the Binance and Bybit exchanges. Among the assets, BTC, ETH and XRP were the leaders.

Fluctuations in the cryptocurrency market have led to the liquidation of some positions also in the decentralized finance (DeFi) industry. In total, positions were liquidated in the amount of $ 24.1 million. This is the second largest indicator in the history of the industry.

The danger of Bitcoin lies in its volatility

Recall that on February 19, the capitalization of bitcoin for the first time exceeded $ 1 trillion. And for the first time in history, bitcoin reached the $ 58,000 mark. Since the beginning of the year, it has almost doubled in price. The surge is driven by the actions of retail and institutional investors who are investing in cryptocurrencies to protect themselves from depreciation of funds while central banks have printed trillions of dollars and pumped them into the economy.

However, the danger of bitcoin lies in its volatility, which is five times greater than that of gold.

Now the capitalization of bitcoin has dropped to $ 856 billion. And the total capitalization of the cryptocurrency market is down to $ 1.386 trillion.

Such a sharp drop could come as a shock to some traders. Especially since the fall in prices resulted in the liquidation of multi-billion dollar long positions. However, this is not a surprise to those who have been following the industry and trading cryptocurrency assets for several years now. As we know, Bitcoin is prone to significant corrections during the growth stages, so you shouldn’t be surprised at what is happening.

It is important to remember that any collapse on a bullish trend should be perceived by investors as a profitable opportunity to buy a digital asset at a lower price – cause after falls it goes up.

Already on February 24, we can see that Bitcoin has returned $ 50,000 amid fresh optimistic comments from large investors.

US Treasury Secretary spoke about the speculative nature of Bitcoin

Amid a sharp drop in the price of Bitcoin, US Treasury Secretary Janet Yellen said that the first cryptocurrency ineffective for transactions due to its highly speculative nature. “Digital currencies can provide faster and cheaper payments. But there are many issues that we need to explore, including consumer protection and money laundering”, she said.

Analysts urged investors not to panic and predicted an early return of positions

David Lifchitz of France’s ExoAlpha believes a 15% correction was inevitable. According to this expert, the market was so overheated that the only way to “let off steam” was a massive sell-off of the cryptocurrency. Simon Peters, an analyst at eToro, shares a similar view. He stressed that in recent days, almost all digital currencies were in the overbought zone.

Former hedge fund manager Raoul Pal, who previously invested 75% of his funds in bitcoin, said that the fall in cryptocurrencies was even necessary. In his opinion, it tempered the appetites of traders and balanced the overall market situation. Thus, it was possible to minimize the risks of a larger rollback.

The correction was the logical culmination of the aggressive pumping of virtual assets.

The head of Abra believes that after the correction, the price of bitcoin will rise to $ 250,000 by the end of 2021.

Despite the short-term correction, Barhydt has no doubts about the large upside potential of the largest cryptocurrency, while the peak of the bull market will depend on the speed of purchases by large corporations. The more funds invest in Bitcoin, the faster volatility will decrease.

Analysts don’t rule out the possibility that eventually Bitcoin will cost $ 1 million and become the world’s reserve currency.

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