Anything that goes up comes down. May it be a ball, an airplane, or the cryptocurrency market. Cryptocurrency markets in recent times have been falling due to multiple factors. And while it is a global fall, we are equally responsible for it. A hike in central bank rates, deteriorating trading activity, and the dollar price rocketing up maybe some of the reasons why the crypto markets’ fall is unstoppable. But there’s also more than meets the eye.
Read on to find out why cryptocurrency markets have been falling for some time, what external factors are affecting them, and check the cryptocurrency markets as of today to know if this trend will persist.
News and Rumors
The cryptocurrency market is highly sensitive to rumors, which can be good or bad. Rumors can spread on Twitter, Facebook, Telegram, and Reddit. They may also be spread by governments and central banks who want to manipulate the markets. Journalists often report false news about cryptocurrencies because their readers are interested in the stories without checking if it’s true or not. For example:
- In 2017 there was a rumor that South Korean officials were going to ban Bitcoin trading in their country; this caused panic selling of Bitcoin and other cryptocurrencies, causing prices to sharply fall before they recovered when Korea announced they would not ban crypto trading at all!
- Another example of a fake news story was one claiming that 80% of Ethereum’s network hash rate was controlled by one mining pool. This caused widespread fear because people believed all Ether transactions could potentially be hacked due to a lack of decentralization. However, no such thing happened!
Whales Dump on the Markets
Another reason why cryptocurrency markets fall is because of whales.
Whales are people who own large amounts of cryptocurrency and can manipulate the market by selling off large amounts of their holdings. This can cause the price of a cryptocurrency to drop drastically, and it’s often done intentionally by those who want to make money from that.
It’s not illegal for someone to sell off all their holdings in one go, but it can create panic among investors as they watch their investments rapidly dwindle in value before their eyes.
Exchanges Go Offline
When the market is in freefall, the last thing you want to worry about is whether your exchange will be up and running when you need it. A shutdown can happen for a number of reasons, but some that affect cryptocurrency markets more than others include:
- Server problems
- DDoS attacks or other cyberattacks on the exchange itself or any of its supporting infrastructure (such as internet service providers)
- Technical issues with specific coins or tokens listed on an exchange
Regulations can have a significant impact on the way businesses operate, which may affect the way consumers interact with cryptocurrencies. For example, regulations that require companies to verify users’ identities before allowing them to buy crypto could make it more difficult for people who want to use crypto without being traced. If enough users leave because of these requirements, it could cause a decrease in demand for cryptocurrencies and drag down prices across the board.
Regulations also affect everything related to cryptocurrency. Exchanges must adhere to certain rules or be shut down, and miners must follow certain standards or risk being penalized. ICOs must meet certain requirements before they can launch, as well as keep up with ongoing standards while they’re running their campaigns. If regulations are too strict and/or poorly enforced (which has historically been common), it could lead investors away from cryptos altogether, further reducing demand relative to supply until supply eventually exceeds demand enough that prices fall further still, at least until things stabilize again (and maybe beyond).
If you’re looking to invest in cryptocurrencies, it’s important to keep up with the news. A quite significant cause of cryptocurrency price fluctuations is news surrounding the cryptocurrency regulation. If a country announces that it will ban all exchanges and trading, or if it introduces stricter regulations for cryptocurrency businesses, then this could have a strong effect on overall prices.
Other events may also affect price fluctuation. Any time there are rumors or reports of an exchange going offline, or if there is evidence that large amounts of coins have been stolen from another company (or even just lost), these could cause people to lose faith in certain currencies and sell them off quickly before others do so first. This would lead to increased volatility in their prices.
Now that you know why the crypto markets are falling, conduct minor research of your own by checking the market regularly, finding out on money-plans.com the cryptocurrency value in your country, and understanding the market cap to make an informed decision about investing.