The current volatility the crypto industry is witnessing has people talking about crashes and dips, which has led to a debate about which state the market is currently in.
Some believe the market has crashed with BTC shocking analysts every day with its behavior, while others think this is just another dip and people are overreacting, as usual.
According to Santiment Feed, a market intelligence platform, there is a marked difference between how traders perceive a crypto dip versus a crash.
“In the former, it’s usually a simple observation that prices have gone down enough to be noticed. In the latter, a full-on crash is when things get interesting,” the platform’s post on X read.
They went further by pointing out that there is no true rule-of-thumb for what should differentiate a dip vs. a crash. However, according to social data, “when traders have decided that a crash has occurred (as they did yesterday), it’s a very reliable bottom indicator.”
According to a chart provided by the platform, prior to February 5, when Bitcoin dropped as low as $60k, there had only been talks of a dip across social media. When it dipped to that level, traders panicked and finally sold Thursday bags at a loss, but as soon as that happened, prices immediately rebounded.
Coincidentally, or not, the term “crash” spiked across social media around the same time the rebound happened.
The post from Santiment also claims that the mainstream media are often quite late to the party but never fail to call attention to the crypto “crash”, helping to get many more eyeballs on it, never mind that $BTC has already shown signs of recovery, up 13% from yesterday’s bottom.
“This simply perpetuates more panic for the latecomers, and allows key stakeholders an easy path to buy from panicked retail,” the post concluded.
What is a true crypto crash?
The recent BTC performance has people talking about crashes and dips, but Santiment Feed’s post implies that what the industry endured, especially on February 5 when BTC touched $60k briefly, was just a dip rather than a crash, as the mainstream media would have the public believe.
It is true that BTC has so far dropped about 50% from its all-time high of $126,000. However, this has been due to a multi-month bearish grind that accelerated sharply on February 5 when it dipped by over 10% in a single day.
Many have compared the price action to the one triggered by the November 2022 FTX crash, even calling it Bitcoin’s worst single-day performance since the event.
However, while the recent dip shocked many traders, if Santiment Feed’s post is to be considered, it qualifies less as a “crash” and just another “dip,” albeit a serious one.
What would fit the profile of a crash would be the price action triggered by the FTX crash. From its peak in 2021, which was around $69,000, BTC dropped by over 70% to lows of around $16,000.
This was part of a prolonged crypto winter triggered by leverage blowup, Luna/3AC’s earlier failures, and then FTX’s explosion. On the worst day, BTC dropped by about 14%, which is around the same rate it dropped on February 5, hence the comparisons.
The media back then also screamed doom and gloom, almost celebrating what looked like the demise of BTC. However, they were more justified back then as things did look dire for the sector.
This time is clearly different. BTC may have touched $60k, but it has since rebounded and seems to be stabilizing once more, leaving behind those who panicked and sold their holdings at a loss.
Source: https://www.cryptopolitan.com/difference-crypto-price-dip-and-crash/
