A correction is typically described as a rapid decline of at least 10% in the price of an asset from a recently reached peak.
Although no strict definition exists, “correction” is used because it often brings the price back to its long-term established trend after experiencing an abnormal surge.
Understanding Market Dynamics
Following a correction, the price of the asset may recover, but it can also lead to more extended periods of decline known as bear markets, during which prices can drop by 20% or more.
Volatility and Recovery Trends
In the cryptocurrency market, corrections of 5-10% are more common than in traditional markets like stocks, primarily due to the high volatility characteristic of cryptocurrencies. However, these corrections are often counterbalanced by frequent recoveries, and the overall trend of most significant cryptocurrencies since the market’s inception in 2009 has been bullish.