What Makes Crypto Go Up and Down?
Cryptocurrencies move according to a repeating algorithm – a powerful growth ends with a downward flight, which in turn is replaced by another strong upward trend after a while. What makes crypto go up and down? Let’s take a closer look at this mechanism.
What Are Financial and Cryptocurrency Markets?
The financial market is a mechanism for the redistribution of assets, cash, and liabilities between buyers and sellers. The value of each asset taken is determined at the auction using supply and demand. For example, assets are most often money and securities. Every day there is a movement of money between investors, traders, companies, and the state.
Operations with currency exchange, purchase of securities, taking out a loan are examples of typical varieties in the financial market.
At its core, the crypto market works just like any other financial market. That is, as in the case of stocks or forex, the main goal of the user is to predict which direction the price of the digital currency will go in the coming months, weeks, hours, or even minutes. This will depend on the chosen trading strategy. Similar to forex, cryptocurrencies are traded in pairs.
This means that a trader is speculating on the value of a digital currency in relation to another asset. It can be either fiat currency or an alternative crypto asset.
As the great British statistician George H.P. Boxing says, “Basically, all models are wrong, but some are useful.” This is especially true when it comes to complex entities such as financial markets. In the case of crypto assets, it is definitely possible to predict the price movement of cryptocurrencies, but no one model will be effective in all market conditions.
The models that are used to predict prices in the crypto market have not been tested in real-world markets and certainly not in cryptography.
Also, the problem of forecasting is that the cryptocurrency market is still being formed in many ways, and forecasting models for crypto assets face many problems that are not present in traditional capital markets. From fake volumes to poor quality of many APIs and datasets.
One of the main problems with cryptocurrency price predictions is that they may lack analytical support. People who make public forecasts may do so for reasons other than fundamentals. They can pursue their own interests. Nevertheless, not all analysts are driven by selfish interests, there are also objective experts. It is useful to compare different forecasts, for example, you can watch reviews of the main price analyzes on our blog: we publish them weekly for different coins.
What Makes Crypto Go Up and Down?
The main reason for the fall in the cryptocurrency market is the famous trader’s adage “trees don’t grow to the sky.” Any trend cannot last forever: the euphoria of growth is always replaced by the depression of the fall.
The term “hype” means excitement, intrusive advertising, hype, information hysteria. This word should not be confused with the consonant term HYIP – investments with a high level of risk.
In the wake of the growth of cryptocurrencies, millions of new investors, inexperienced in exchange speculation, have entered the market. Figures and profit percentages began to overshadow the mind: people who yesterday did not know anything about the financial markets, carried their money (sometimes the last) to this new and poorly regulated market. A very high price had to be paid for this.
Examples of a fall in the cryptocurrency market show the importance of the psychological preparation of the investor and the presence of an investment plan. The latter is even more important than psychology. If you believe in the cryptocurrency market and expect its further growth, then even a drop of almost three times is not a reason for disappointment. A fall in the asset market is a great opportunity to enter the market at a “cheap” price. It is important for an investor to make such an entry on an ongoing basis.
Reasons for the Downtrend
In the spring of 2021, Elon Musk’s tweets about the centralization of bitcoin and the ban on supporting the cryptocurrency business in the PRC became one of the main reasons for the fall of the first cryptocurrency up to the level of $30,000.
Elon Musk’s Tweets
The prerequisites for the fall of the cryptocurrency market arise from Tesla’s refusal to accept payments in bitcoin and rumors about the possible sale of a coin from the company’s assets.
Elon Musk’s actions disappointed investors, as the hopes for Bitcoin’s entry into the world of large multinational companies have not yet come true. The bearish sentiment of market participants was exacerbated by the news that support for cryptocurrency-related businesses was banned in China.
Mining Ban in China
The PRC has a huge mining capacity and a large share of the e-commerce market, which is targeted by cryptocurrencies. The market fears that following China, a ban could be introduced in other countries.
According to experts, the fall was due to the general disappointment of investors in the dynamics of cryptocurrencies, and Musk’s tweets and the PRC’s bans fell into fertile soil.
However, by today, bitcoin corrected to $51,000.
What Is Happening With Cryptocurrency Today?
Fundamentally, the outlook for the cryptocurrency market looks optimistic. The recognition of the regulators of the world’s leading economies indicates the interest in embedding a new market in the already existing infrastructure of the international finance space.
Regulators and supervisory authorities in countries such as the USA, Japan, UK, Germany have taken notice of this market. Its first regulation appeared, which caused another surge in the popularity and growth of cryptocurrencies. If regulators took up arms against this market, it would be a signal that it has no right to life. Now we see the opposite process: the cryptocurrency market is being integrated into the financial system.
Correction of the Crypto Market as a Change of Seasons
The current correction in the cryptocurrency market is not something extraordinary or exceptional. Moreover, it is necessary to see the picture of the market as a whole in order to judge the future. According to experts, a hypothetical correction and the loss of even 80% of the value by bitcoin – will not be a fatal blow to the crypto market, but for a long time, it can consolidate the latter as a niche market.
And don’t forget that StealthEX is the best platform to get crypto coins. The process is private, and everyone can buy digital assets instantly without worrying about their safety. You can select more than 400 different cryptocurrencies with no need to provide many details.
How To Buy Crypto?
Just go to StealthEX exchange and follow these easy steps:
- Choose the pair and the amount for your exchange. For example, BTC to ETH coin.
- Press the “Start exchange” button.
- Provide the recipient address to which the coins will be transferred.
- Move your cryptocurrency for the exchange.
- Receive your crypto coins!
The views and opinions expressed here are solely those of the author. Every investment and trading move involves risk. You should conduct your own research when making a decision.