Crypto: How To Deal With Prolonged Corrections?

Is the party over for cryptos? After a period of euphoria, correction signals are multiplying, hinting at a lasting slowdown. While this situation may deter some investors, the most optimistic see it as a long-term buying opportunity. According to the analyses of Daniel Cheung, co-founder of Syncracy Capital, the current movements in the crypto market highlight profound changes in trader psychology.

Traders and their short-term obsession

The crypto market is in the red and has changed significantly: once dominated by a “HODL” mentality (hold at all costs), it now seems captured by traders focused on short-term gains. Daniel Cheung observes:

Participants are constantly seeking quick profits, despite the limited effectiveness of this strategy in the long run.

Market participant psychology has drastically shifted in crypto this cycle.

In prior cycles, participants largely engaged in a HODL and buy the dip mentality.

This cycle, participants are mostly in a short term / trading mentality and constantly looking to take profits, despite…

— Daniel Cheung (@HighCoinviction) December 9, 2024

As a result: monthly fluctuations are intensifying, making market timing even more challenging.

The numbers speak for themselves: in just 24 hours, the total market capitalization of cryptos fell by 5.41%, reaching 3.44 trillion dollars. Among the biggest losers:

• Kaia (KAIA), down 31.3%;
• Stellar (XLM), plummeting 28.3%;
• Flare (FLR), which lost 26.9%.

Santiment, an analytics company, however, tempers the fears: corrections could lead to a rapid rebound for cryptos like TRX, AVAX, or DOT. But investors must avoid giving in to panic.

Pav Hundal, an analyst at Swyftx, adds that leveraged traders, caught off guard, suffered massive losses, with 1.58 billion dollars liquidated in 24 hours.

The crypto market, between volatility and opportunities

In the face of such instability, some players remain convinced that the crypto market still offers opportunities to seize. For Daniel Cheung, these corrections, although intense, could extend buying-on-dip scenarios:

The current lows are likely to last much longer than most investors imagine.

Bitfinex, for its part, expresses confidence regarding a lessening of selling pressures on bitcoin. After a 10% drop last week, their analysts predict less brutal declines in the future, due to a slowdown of sellers and a decrease in realized profits.

This climate could favor a gradual and stable recovery, unlike previous cycles marked by extreme highs and lows.

However, as Cheung points out, ” the true peak of this cycle will be reached when the short-term mindset gives way to a long-term vision “. In the meantime, altcoin traders and volatility enthusiasts will have their work cut out for them, but with caution.

And to navigate this complex context, investors can explore at least seven trading models on bitcoin, of which at least one seems particularly promising. Good analysis remains the key to maximizing gains and avoiding pitfalls.