A market correction is a common term that is said in the crypto space. If you are on Twitter, there is a great chance that you may have stumbled on it.
This is a decline of at least 10% of the value of a digital asset like cryptocurrency or the crypto market in general. A correction may last for as short as a few hours to a few months or as long as some years.
This type of downward trend is called a correction because the dip is quite small, meaning that the crypto had moved from the normal trend that it used to take.
Corrections are not linked only to the crypto market, as stocks also suffer from this. It is quite common in the crypto space because of how volatile the digital asset is.
Typically, once corrections occur, it may end up in the market recovering. Sometimes, it can degenerate into a higher level of decline, which is known as a bear market.
A bear market occurs when the decline is at least 20%. When the crypto market is bearish, it means that the values of cryptocurrencies are moving downward.
Usually, bear market and market correction are both declines in the market value of crypto, but they’re different based on the level of decline. A decline of at least 10% is seen as a market correction, and a decline of at least 20% is a bear market.
Market corrections can be caused by negative news like the news of a war about to begin can trigger it. Triggers may also be economic in nature. Let’s say the economic conditions become tighter, people may not have enough funds to purchase cryptocurrencies.
Corrections are quite common in the crypto market, and it is important to know the differences between it and a bear market.