A correction is a market term which describes a temporary price drop that follows a period of strong asset price increases. The term correction in cryptocurrency markets describes price decreases which reach 10 percent or greater from recent peak values although no specific standard exists. Market cycles include corrections as regular events which investors consider to occur without starting a larger market decline.
Cryptocurrencies experience corrections after their prices increase rapidly through positive market sentiment and speculative trading and important news announcements. Investors begin taking profits when prices increase rapidly while other investors show more caution about buying at increased price points. The result of this behavioral shift leads to selling pressure which causes prices to decrease. The market experiences a slowdown while people show less intense excitement.
A correction typically occurs within an active trend which requires its completion to establish pattern termination. An upward price movement through the market creates a situation where traders experience temporary price corrections which do not stop market progress. The distinction between correction and crash exists because analysts use this method to identify market patterns. A crash occurs through abrupt market decline which results from panic and system faults and unanticipated adverse developments.
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