Bitcoinβs halving event reduces mining rewards, limiting supply. Historically, this has led to price increases due to reduced supply and continued demand. However, market sentiment, macroeconomics, and investor psychology also play a crucial role.
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Large price drops often trigger fear and panic among investors, leading to a "sell-off" as people try to cut their losses. This reaction can cause further declines, reinforcing negative sentiment. On the flip side, for some investors, such drops present buying opportunities, especially if they believe the asset will recover. Market sentiment tends to shift toward caution or pessimism during such periods, and short-term traders may dominate the market, while long-term investors might hold or buy more. This cycle of fear and greed heavily influences crypto price volatility.
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The RSI is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100, with readings above 70 typically indicating overbought conditions (suggesting a potential price drop), while readings below 30 signal oversold conditions (indicating a potential price rise). In the volatile crypto market, RSI helps traders spot potential reversals and entry/exit points. When combined with other indicators, it can provide valuable insights into the market's short-term price action and investor sentiment.
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