When is the best time to invest? Buy now or later? Is it a high time to sell or not? Learn more about the factors that have an impact on the cryptocurrency rate to always keep your finger on the pulse of the crypto trend.
A cryptocurrency is a digital alternative to fiat currencies, which has no physical form. Since you can exchange cryptocurrencies online, you speed up transactions and minimize the external impact on the exchange process.
Over the past few years, the demand for cryptocurrencies has skyrocketed. That is why many people thought about making money with cryptocurrencies. However, unstable rates and the volatility of the cryptocurrency market cause concern. You need to understand what factors affect the price movement.
This general concept includes several factors.
News. It can also be described as a psychological factor. The public can be easily manipulated by media outlets.
NEWS IS DIVIDED INTO:
You need to understand that news is often fake and specifically aims to destabilize the market.
Public Response. Mentioning of cryptocurrencies on social media and in mass media played an important role in the fate of bitcoin. Public interest is just like PR, and PR is demand. As soon as people actively talk about a cryptocurrency, the demand for this cryptocurrency goes up, which means that the price rises as well.
The public response does not last long, which is why it is important to “ride the wave” and have time to sell/buy profitably.
Technical Factors. These include the emergence of new platforms, investor interest, and innovative features.
No matter how rapidly the cryptocurrency market develops, it still depends on the economic rules of supply-and-demand equilibrium. The price goes up when there is demand. That is why the market can be successfully manipulated and controlled according to your own rules. That’s what market participants do sometimes.
Politicians. In 2017, some influential U.S. politicians criticized bitcoin—its exchange rate plummeted from $5,000 to $3,000. Then they bought up cryptocurrencies and changed their minds.
Big Capital. In January 2018, the famous trader George Soros called cryptocurrency a bubble. By April, bitcoin had lost 41%, and Soros had changed the tune dramatically. Since May, the New York branch of Soros Fund Management has been allowed to trade cryptocurrencies.
Banks and Exchanges. Wary of money laundering and disinvestment, the Central Bank of the Republic of China toughened bitcoin trading rules in 2017. It also began to declassify the data of large cryptocurrency exchanges, such as Huobi and OKCoin, due to possible risks on these platforms.
Exchanges stopped cryptocurrency withdrawals from accounts. Consequently, China lost positions in the global cryptocurrency market.
Any system changes spark an immediate reaction from investors and major players. In this case, forks (changes or updates) are not always good for cryptocurrencies. Bitcoin is the first cryptocurrency that gave rise to the first cryptocurrency fork.
Investors are wary of news about new forks because it is not clear how the cryptocurrency rate will change.
Miners primarily focus on ensuring that cryptocurrency platforms run stably. If the price falls, miners switch to direct purchases that enables them to restore the rate and make mining profitable again.
Tom Lee, the co-founder of Fundstrat Global Advisors, claims that it is the miners who can keep the bitcoin rate afloat and prevent it from dropping below $6,000.
Interest in cryptocurrency is growing, as new mining algorithms and forks appear in the market. Theoretically, a larger number of miners must bring down the rate, but this does not happen in a real-case scenario. In recent years, miners have actively moved to mining less popular coins, which can trigger competition in the market.
Cryptocurrencies are not physical money, which is why tampering, hacking attacks, closing platforms and exchanges, disclosure risks are some of the key factors affecting their rate.
Coding errors can drain you of millions. When governments compromise the anonymity of wallet owners, it leads to data leakage and cryptocurrency drain.
Cryptocurrencies are, however, perfect for risk diversification, and high volatility enables you to make large profits.