Many people has already been attracted to the crypto market and many more are still joining. In a matter of a few years, we have seen some of the very advanced cryptocurrencies increase in their value. These include; Bitcoin, Litecoin, Verge and Ethereum.
Most of the time if you look on the internet, you will often see a lot of stories about those who happened to invest in the crypto market just at the right time, and they seem to be quite successful. Seeing this, of course a lot of people would also like to invest in such a market but the risks involved sometimes scares them away.
This is a market where inexperience can cost you a lot thus it is important for one to understand how the crypto market works, things that can affect the market and how they can also predict the shifting of the price. That being said, let us look at some of the factors that often affects the cryptocurrency market.
1. News
We all know one of the best ways to get to the public, is through the media, right? People can usually panic especially after hearing some terrific news and this only bring fear and a bit of disorganization.
Well, for instance when the ICO was banned by China back in 2017. The panic alone saw the price for bitcoin drop to $3000 from $5000. In as much as this is also a factor that can affect the market, it can however be used only for short-term predictions.
The news may be different depending on the nature of the source. It might be political or systemic for instance. We also witness the value of both bitcoins and altcoins dropping after some few problems with the South Korea and Chinese exchanges.
This is from the political sources. On the other side, systemic sources implies an innovative change of a platform and this result to some scaling in the crypto market. This is why you need to be keen on the news and always be on the watch for any latest developments.
However, you also need to have in mind that this can be used to manipulate the prices too. See this link if you would like to know more on the role played by the media in crypto world https://cointelegraph.com/news/medias-role-in-blockchain-and-crypto-interview-with-techcrunchs-mike-butcher.
2. The Fear Factor
Those who are thought to be market leaders always control it with some assistance from fear of missed opportunity also known as FOMO or fear, uncertainty and doubt, FUD. The activities of those financial giant also have a huge impact on the market as they facilitate the rice and the fall in price rates.
This is how the mood of the majority is formed which later leads to a decline or an increase in growth. Well, a really enhanced growth can always make people feel much confident thus everyone will be rushing to buy the assets without even thinking.
On the other side, quick sales might occur due to fear and uncertainty. In short, it is wise if you don’t go with the crowd and just do your thing independently, mostly when people are rushing to buy if you want to buy or when a lot of people are selling, if you are also considering to sell.
3. Mutual Influence
If you compare the movement perceived by the large-capped currencies, it seem to appear that some cryptocurrencies falls under one bundle.
This can often be noticed when you look at the daily charts and you will realize that altcoins are repeating just the same move made by bitcoin. You may notice that bitcoin acts as a leader and giving support to the crypto market.
In certain occasions, there would be a serious flow of funds to the bitcoins from the altcoins, thus strengthening the value of bitcoins. This however, is always an exception which is inversely proportional to the general dynamics.
4. Technological Progress
Well, when talking about factors affecting the development of a market, I don’t think it is wise not to look at technological aspects. This has seen the emergence of new trading platforms and other software i.e. the Bitcoin Trader to go with it.
There is also an increasing interest from investors and this usually impact positively on the value of the assets in the long-term. However, the crypto market is usually conditioned by its position to our traditional economic or financial foundations.
With the advantages it comes with, it acts as a great foundation to the development or improvement of the crypto market. It aims to improve in different areas including striving to make transactions more efficient and transparent.
Anyway, with technology and economics, you can always be on the lookout for a great breakthrough in innovation or a complete failure.
5. Political Factor
The news will only warn you about the short term effects on the market. But with a bad political situation, the crypto market can be terribly destabilized. We saw the market collapse when South Korea brought down their crypto exchanges.
Anyway, it is great to have in mind that news can often be reckless and doesn’t reflect the objective positions but a political regulation can make a deal that might really shake the crypto market. For instance, China mining industries occupies a huge percentage of the total number of pools.
This most probably means that they have a greater amount of capital. When the mining is banned, it will lead to a huge funds outflow which can interfere with the balance of the market thus leading to a long term dormancy in the market.
This is on the bad side. But you also need to understand that there can also be positive political regulations that might lead to the development of the market.
6. Economic Factor
If there is an instability in the world’s finances then the fiat currency will also be affected. This means that people will start to look for other ways to invest their money. This also includes other things such as dependence on the emitters, inflation and devaluation.
Since the crypto market is still quite young and a bit vulnerable, there is still a problem when it comes to the acceptance of cryptocurrency as a payment method. Well, the traditional finance companies and the fiat money are both conservative when it comes to the economic dimension.
Despite all that we have tried to simplify our financial transactions, most of the things are still the same. There is still a centralized management among other things. It seems like the technology can only simplify how the structures interact but doesn’t change the core principles.
This is where the cryptocurrency comes in since it contains both the two aspects and is capable of bringing some impact on our economic system in all categories. Click here to see what is being said about cryptocurrency on the economy.
Conclusion
Before you join or start to participate in any kind of business, you will first need to learn the market dynamics and know how they can affect your business. When it comes the crypto market, it is usually not just a matter of buying them and selling them.
I believe among your reasons for investing in the crypto market is to make profits, right? For you to be able to do that effectively, you first need to understand every bit of it so that you may not be passed by any opportunity to make yourself some profits.
The cryptocurrency market might be a bit complex to get at first but all you need is time and patience just before you can strike. However, also be on the lookout for fraudsters. If you are wondering why there is usually some changes on the market. The above factors might be responsible. You can see more about bitcoin trading here.
