Market correction

A correction is a decline that pulls prices back from a recent high without, at least yet, reversing the longer trend. In traditional finance the usual rule of thumb is a fall of at least 10% from the peak, while a drop beyond 20% is commonly labelled a bear market. These thresholds are conventions, not formal definitions.

Crypto is far more volatile, so declines of 20% to 30% in bitcoin have happened many times inside broader bull markets, and altcoins often fall twice as much. Corrections tend to follow rapid rallies, heavy use of leverage and high funding rates, and are frequently accelerated by cascades of liquidations in the derivatives market.

A correction can only be identified with hindsight: at the time, no one knows whether a drop will stop at 15% or turn into a prolonged downtrend. Position sizes that can survive large swings and limited leverage matter more than trying to call the exact bottom.