Update: The initial support targets have been breached and the current correction is looking to test a 50% pullback from highs.
Investor psychology is such that everyone wants to wait for a correction and then when it happens, they are too scared to buy. Remember to be greedy when others are fearful.
The entire cryptocurrency sector has corrected sharply today. I believe prices had become overheated and this correction is healthy for the long-term bull market in cryptocurrencies. I think this will be another routine correction and not the start of a new bear market.
The average correction of Bitcoin this year has been 30% and occurred roughly once per quarter. Thus, I believe we can look at price levels that are 30% lower than the recent highs as good entry points to start accumulating.
I also look to the 50% Fibonacci retracement level as a potential bottom during corrections such as this. This is a 50% retracement of the latest major bull run higher and in this case, the 30% correction and 50% retracement coincide rather well.
Bitcoin crashed from a high of around $19,500 to a low of $13,500. It has since rebounded to $14,000 as I compose this alert. A 30% correction from $19,500 puts the price at $13,650. A 50% retracement of the move from $7,500 to $19,500 ($12,000 / 2 = $6,000) is also $13,500.
This increases the odds that $13,500 ends up being the bottom of the current correction in the Bitcoin price. Of course, this is not an exact science and there is no guarantee with technical analysis. But I am starting to add at this price level and will keep some additional powder dry should the price continue lower.
The Ethereum price corrected from a high around $875 to a low of $650 today, before bouncing back toward $700. A 30% correction is $612 and a 25% correction is around $650. A 50% retracement of the December advance also puts the price at around $650.
I will start adding to my Ethereum position around $650 and keep some powder dry should the price continue lower.
Litecoin has corrected from $375 to $250 today. It bounced around $250 and is currently trading around $275. A 30% correction from the high puts the price at $260, which again roughly coincides with a 50% retracement.
I will start adding to my position in Litecoin on a drop to $260 and continue adding if the price drops to $200 or lower. I remain very bullish on Litecoin and believe it is undervalued on an absolute basis and relative to Bitcoin. There have been recent rumors that Facebook may integrate Litecoin payments on their platform. There is no way to confirm this, so take this chatter with a grain of salt. But it would be huge for Litecoin and likely send the price rocketing higher if an announcement is made.
I think that the BTC-to-LTC ratio may dip to 10 during 2018. At the current Bitcoin price, this would imply a Litecoin price of $1,500 or roughly 5x the current price. Of course, as the Bitcoin price rises, so does our target price for Litecoin.
Altcoins have also corrected sharply today, after becoming very overheated this past week. We have seen some ridiculous valuations for companies that do not even have a functioning network or product. The hype has reached a fevered pitch reminiscent of the dotcom bubble era, so I am actually happy to see altcoins correct sharply. I believe this is good for the long-term sustainability of these coins to rise at a more moderate pace.
I may look to add one or more of the coins on our watch list during this correction. These potential additions include: Please subscribe to view our top cryptocurrency picks.
It can be difficult to buy during significant corrections. Fear is a very powerful emotion and investor psychology is such that we are more comfortable buying near all-time highs than during big dips. But history has proven that it is significantly more profitable to be a contrarian, go against the herd and buy when others are panic selling.
Of course, there is always the risk of catching a falling knife. But I believe the cryptocurrency bull market is still in the early innings and we are using as much information as possible to determine potential bottoms. We are also buying in tranches here and keeping some cash on the sidelines should the current correction have greater magnitude than prior corrections.
I am in the process of reviewing a number of new ICOs this week and should have final ratings by end of day tomorrow. The ICOs that we rated as a ‘buy’ during 2017 are up an average of nearly 400%! Most of those coins have only been trading a few months since being listed on exchanges.
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