As analysts like Arthur Hayes are warning of possible Bitcoin downward movement, the crypto market is facing the dilemma of whether it is a price correction or a crash. This comes at a time after Bitcoin made many headwinds due to Donald Trump’s winning the US election and the pro-crypto orders he signed last week. This has prompted many to predict that Bitcoin will go above $160,000 this year but before it takes charge there is a looming price correction.

Hence, in this article, we have explored the phenomenon in detail and how it differs from a potential price crash or market. By the end of it, crypto traders will get an idea of how to buy the dip and make the most of it in these conditions.

The Hayes Factor: BitMEX Founder's Bold Prediction

Arthur Hayes, the influential founder of BitMEX, has sent ripples through the cryptocurrency community with his latest prediction. On January 27, 2025, Hayes took to X (formerly Twitter) to forecast a substantial Bitcoin price correction, targeting the $70,000-$75,000 range. This prediction, representing a potential 30% decline from current levels, has garnered significant attention given Hayes's track record of accurate market calls in 2024.

Despite the bearish short-term outlook, Hayes maintains an optimistic long-term vision, projecting Bitcoin to reach $250,000 by the end of 2025. His thesis revolves around an anticipated "mini financial crisis" that could trigger renewed quantitative easing measures.

Market sentiments indicating Hayes’ prediction?

The current market structure appears to support Hayes's concerns. Bitcoin's price action has formed a potentially bearish double-top pattern on daily charts, with a critical neckline positioned just below $92,000. The asset has already experienced a sharp 5% correction from its recent high of $105,000, currently hovering around the psychologically significant $100,000 level.

The Equity Connection

Adding credence to the correction thesis is Bitcoin's historical correlation with U.S. tech stocks. Recent developments, including the emergence of DeepSeek's cost-effective AI model, have raised questions about potential overvaluation in the AI sector. The Kobeissi Letter has highlighted the possibility of a trillion-dollar market value erosion in U.S. equities, which could create downward pressure on Bitcoin prices.

How Price Corrections Happen And Ways To Trade

The Anatomy of a Price Correction

Market or Price corrections represent natural and necessary components of any asset's price cycle. In cryptocurrency markets, a correction typically manifests as a 10% or greater price decline from recent peaks, serving as a mechanism to restore price equilibrium after periods of excessive speculation or rapid appreciation.

Corrections often emerge from a combination of profit-taking behavior, changing market sentiment, and technical factors. They can be triggered by various catalysts, including regulatory news, technological developments, or shifts in broader market dynamics. Bitcoin's journey has been marked by several significant corrections, including the 94% decline in 2011, 87% drop in 2013, and 84% fall in 2017. Despite these substantial drawdowns, Bitcoin has consistently demonstrated resilience, with each correction ultimately giving way to new all-time highs.

Is It A Crash or A Correction? What’s the Difference?

Picture yourself as a crypto-market detective, searching for telltale signs of an impending crash. Your most reliable informants? The dynamic duo of trading volume and moving averages. When Bitcoin starts showing unusually high selling volume while dipping below its 50-day or 200-day moving average, it's like watching storm clouds gather before a hurricane.

Take February 2020, for instance. Bitcoin was giving us the crypto equivalent of horror movie foreshadowing – you know, those moments when the protagonist ignores all the obvious warning signs? The market was screaming "danger ahead!" with above-average selling volume and prices sneaking below the 50-day moving average. What followed was crypto's own version of a blockbuster disaster film.

Enter "Black Thursday" – March 12, 2020. This wasn't just any ordinary price dip; this was Bitcoin's dramatic response to the WHO's coronavirus pandemic announcement. Picture this: Bitcoin took a heart-stopping plunge from nearly $8,000 to about $4,800 in what felt like a blink of an eye. That's a 40% nosedive that had even seasoned traders reaching for their stress balls.

But if you think that's dramatic, let me tell you about the granddaddy of all Bitcoin crashes. Wind back the clock to April 10, 2013. The U.S. Financial Crimes Enforcement Network (FinCEN) had just dropped a regulatory bombshell, shuttering the Bitfloor exchange and demanding all crypto exchanges register as "money transmitters." Bitcoin's reaction? A jaw-dropping 73.1% price collapse in just 24 hours. We're talking about a fall from $259.34 to a mere $70 – the kind of drop that makes roller coasters look tame.

Now, let's contrast these heart-stopping crashes with Bitcoin's more modest price corrections. Think of corrections as Bitcoin taking a breather rather than falling off a cliff. During the period between December 2020 and March 2021, we saw something fascinating. The price chart showed two distinct corrections, but here's the key difference: neither of them fully surrendered to the 50-day moving average. Sure, one correction flirted with that line, briefly crossing it like a toe testing water, but it never fully committed to the plunge. This is the crucial distinction between a correction's gentle descent and a crash's free fall.

These market behaviors tell us something important: while crashes tend to break through technical barriers like a wrecking ball, corrections respect these boundaries like a cautious driver respecting speed limits. Understanding this difference isn't just academic – it's your financial safety belt in the wild world of crypto trading.

Trading During Corrections: A Strategic Approach

Risk Management Essentials

During corrections, successful traders typically employ several key strategies: Position Sizing: Maintaining smaller position sizes to limit exposure to potential further downside Dollar-Cost Averaging: Systematically acquiring assets at lower prices throughout the correction Technical Analysis: Monitoring key support levels and volume patterns to identify potential reversal points

Opportunity Recognition

Long-term holders should be making the stride during price corrections as they are likely to profit in the long run. It might seem daunting to invest in Bitcoin now as we approach the price corrections yet this is the exact entry point. It all depends on the traders’ decision-making and investment strategy. While buying the dip, it is important not to be emotional and take a strategic sizing and entry timing outlook.

As Bitcoin navigates this potential correction phase, market participants should remain vigilant while maintaining perspective on the asset's long-term value proposition. Whether Hayes's prediction materializes or not, understanding the nature of market corrections and maintaining appropriate risk management strategies will be crucial for traders and investors alike in the coming months.

As of January 27, Bitcoin is trading at $99,390 with a 5.39% decline in the last 24 hours, while its trading volume has increased a whopping 333% to reach $81.77 billion and the market cap is down 5.40% to be at $1.97 trillion.