There is no strict definition of a correction, but it is commonly used to describe a rapid decrease of at least 10% in the price of an asset from a recently achieved peak. It is called a correction because it usually returns the price from an abnormal surge to its long-term established trend.
Corrections are usually followed by recoveries, but they may also lead to more prolonged periods of decline called bear markets when prices can drop by 20% or more. For example, according to the data of the financial services company Charles Schwab, there were 24 corrections in the S&P 500 stock market index during the period from November 1974 to February 2020, only five of which have resulted in bear markets.
In the cryptocurrency market, corrections of 5-10% are significantly more frequent than in the stock and other traditional markets, owing to its characteristically high volatility. However, they tend to be balanced out by similarly frequent recoveries, and the overall trend of most major coins since the inception of the market in 2009 has been a bullish one.
As an example, Bitcoin’s (BTC) price grew from as little as $0.003 per coin in 2010 to more than $19,000 in 2020, despite at times suffering corrections of as much as 50% in the span of a single day.
Related Articles
Crypto Invoicing
Crypto invoicing allows you to create different itemized bills and invoices for the products or services you offer. It enables you to bill clients in crypto via email, without the hassle of switching between wallets and apps. As cryptocurrencies ...
Crypto Debit Card
A crypto debit card is a type of debit card that allows its holder to pay for goods and services using cryptocurrencies like Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH). Most crypto debit cards in use today are powered by Visa and MasterCard, ...
Crypto Address
A crypto address is a string of characters that represents a wallet that can send and receive cryptocurrency. It is akin to a real-life address, email or website. Every address is unique and denotes the location of a wallet on the blockchain. Most ...
Cryptojacking
Some cryptocurrencies are mineable, meaning that people can choose to expend their computational resources to secure the operation of the blockchain and earn newly created coins in exchange; the coins can later be traded on crypto exchanges for ...
Cryptoasset
Cryptoassets leverage cryptography, consensus algorithms, distributed ledgers, peer-to-peer technology and/or smart contracts to function as a store of value, medium of exchange, unit of account, or decentralized application (DApp). There are four ...