What influences the rise and fall of the crypto market: Current market update
It’s no secret that the crypto market is volatile and foreesees a crypto market crash. It’s a market still in its early stages—and as such, there are a lot of unknowns. One big unknown is what will influence the rise and fall of the crypto market. So, in this blog post, we will explore factors that have influenced the market so far and might be responsible for its volatility in the future and crypto market crash.
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The volatility of cryptocurrencies is well-known, and this is also true of the cryptocurrency market. Short-term price fluctuations in cryptocurrencies are common, and a variety of variables, including governmental policies, media attention, and economic situations, may contribute to this volatility.
The cryptocurrency market may be impacted by broader economic factors including unemployment, interest rates, and inflation. People may be more willing to invest in cryptocurrencies as a hedge against inflation, for instance, if inflation is high.
Bitcoin and Ethereum: The pioneers of the crypto market
Bitcoin holds the title to be the first cryptocurrency in the market, which was created in 2009. As of March 2022, over 9000 cryptocurrencies were available in the market.
Most of these currencies are used for online payments. However, Bitcoin is still the most popular one.
Besides Bitcoin, Ethereum is also very famous. It was introduced in the market to use blockchain technology for online payments and storing computer programs that help create secure decentralized financial contracts and applications.
Since cryptocurrencies are decentralized, the government or financial institution has no control over them. This has led some regulators to consider them a potential threat to traditional financial systems. However, others see cryptocurrencies as a way to reduce financial risks and increase privacy.
According to this article, Bitcoin and Ethereum are the two major cryptocurrencies in the market. These crypto assets have recorded significant growth over the decade due to their strong performance against traditional assets such as stocks and bonds.
However, both assets have also experienced its fair share of declines over the past year, reaching lows before rebounding recently.
Bitcoin dropped to a two-year low, losing more than two-thirds of its value which was $69,000, in November last year. It is currently trading at $16,700, where Ethereum has dropped 75% since its peak.
Due to this, the overall market capitalization of cryptocurrency came under $1 trillion for the first time since January 2021.
What causes the crypto market to go up and down?
Cryptocurrencies continue to fluctuate in value as the market continues to exhibit volatility. Many factors influence the rise and fall of the crypto market, including news events, regulatory changes, technology, and overall global sentiment. Let’s take a look at some of the most important drivers of the market:
Cryptocurrency prices are highly sensitive to some news events. Prices tend to go up whenever there is significant news coverage of a new development or announcement related to cryptocurrencies. This was particularly evident in late 2017 and early 2018 when major news events such as the China crackdown on cryptocurrency exchanges and Bitcoin’s surge above $19,000 drew significant attention to the space. Since then, however, news events have had less of an impact on prices.
Regulatory changes can also have a significant impact on the price of cryptocurrencies. For example, when Japan legalized Bitcoin as a legal payment method in April 2018, this increased demand for Bitcoins and, consequently, higher prices. Similarly, when regulators in South Korea announced plans to ban all trading in digital assets by residents, this caused a sharp decline in prices across all cryptocurrencies.
The overall sentiment around cryptocurrencies is one of the most important drivers of their price movement. Investors who believe that the crypto market is about to enter another growth spurt will tend to buy cryptocurrencies in anticipation. Conversely, whenever there are signs that investor confidence is waning (for example, after a sharp sell-off in the market), more people will sell their cryptocurrencies, causing prices to fall.
Cryptocurrencies are powered by blockchain technology, a distributed ledger that allows for secure transactions and censorship-resistant data sharing. This disruptive innovation has spawned dozens of other digital tokens and platforms based on its principles.
With technological advancement, it’s now extremely easy for a common person to invest in crypto markets. Trading platforms such as easymarkets.com provide mobile apps through which anyone can easily create an account and start trading in no time. As more people adopt cryptocurrencies and decentralized technologies, the value of these assets will continue to grow.
Major financial institutions are starting to take notice of the potential for blockchain and cryptocurrencies to revolutionize the way money is transferred and managed.
In 2017 alone, Fidelity Investments LLC announced plans to open a Bitcoin trading operation, Goldman Sachs Group Inc. formed a company focused on blockchain technology development, and JPMorgan Chase & Co. launched a product called JPMorgan Coin that allows customers to use their cryptocurrency holdings to purchase goods and services from third-party vendors.
These developments suggest that the crypto market has yet to establish itself completely, and there’s plenty of room for growth.
Since the beginning of the year, the crypto market has seen a tremendous price fall and crypto market crash. As a result, there is a decline in interest and demand for cryptos. This downturn is likely due to several factors, including regulatory uncertainty; negative sentiment; and lack of adoption of blockchain technology.
Nonetheless, volatility will likely continue until there is definitive evidence that either digital assets or blockchain technology will revolutionize traditional economies and business models.
Brantlee Bhide is a project manager at HB Consultancy. She has 16 years of experience working as a project professional across varying industries, countries, and cultures. She operates in both business and technical domains using an approach that she developed.