If we look back at the recent price corrections in Bitcoin we see they have a relatively short lifespan. For example, the most recent pullback was around September 15, when China announced they were clamping down on exchanges. The price dropped from a near high of $4900 a few days prior, all the way down to $3K in the span of two days. This was a HUGE correction, one that was fueled by bad news, but still a correction. But how long did it last? Within one day the price had already recovered by $700 and it continued on an upward trend, surpassing the previous high, and setting an new all time high of $5700 less than a month later, and had made up all of it’s losses in less than 2 weeks.
The reason I think the September recovery and time frame is important to note is because it happened in what I will refer to as the “modern era” of Bitcoin. And by that I mean that investors see Bitcoin much differently in the last year than they saw it a few years ago. A few years ago, when Bitcoin had a big correction, there was a belief that this could spell the end of Bitcoin. When the price dropped 50% people thought that perhaps this was the end of the road for this strange new currency and technology. Obviously the die hards would still believe, but the average investor would be scared off by a huge correction and it would often take months to start a recovery. But today, Bitcoin and crypto currencies are far more established. People believe in them much more for the long term, and in some cases the very long term. And because of this, investor reaction to a correction is much different than it was a few years ago. In fact, most investors see a major correction as a positive, as it gives them a chance to finally add to their portfolio without paying a huge premium.
So why am I talking about a Bitcoin correction? Well, it’s pretty obvious that we are due for one soon, and the possible uncertainty after the fork could very well prove to be the catalyst behind a significant correction. So then the question we ask is, how low and for how long? Based on historical corrections, Bitcoin could very well drop to the $5K or low $5K level. However, the real question is how long will it take to recover. And this is where I believe the previous correction will hold true again. I feel the correction will last 30 days or less, and most of the losses will be recovered in a about 2 weeks, with new highs being tested around the 30 day mark.
The bottom line is, Bitcoin has mostly good news ahead. But a correction is needed and will come. However, I believe it will be mostly short lived before testing new highs again based on the most recent corrections and recoveries. So make sure to take this into account when setting up your investment strategies in the coming weeks.