What affects cryptocurrency rising and falling?

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For some investors and traders, the rise and fall of cryptocurrencies is what got them started in the first place. The adrenalin-pumping excitement of whether a crypto will boom or bust is all part of the fun. However, for others who may be investing and trading in serious sums of money, seeing their investment prices rise or fall can result in fierce trading action, which can have a dramatic effect on the market.

Crypto volatility

All trading markets have their ups and downs but none more so than cryptocurrency. When comparing stocks to cryptocurrency trends, the digital currency experiences much higher peaks and far lower troughs. This can make for a thrilling investment ride – however, it also carries a lot of risk.

While annual percentage returns in the hundreds are rare across the traditional stock market, in the crypto world, they’re pretty common. Crypto values are so volatile that we can witness a rise or fall in cryptocurrency prices of over 10% in a day.

So what makes the market change so dramatically? Predicting the rise or fall of cryptocurrencies can involve guesswork as well as trend research, but we have also observed significant factors that can have an impact on crypto values.

Internal factors

Let’s take a look at some of the internal factors that can have an effect on cryptocurrency prices:

Crypto traders

Highly active cryptocurrency traders have a direct effect on the rise and fall of crypto values. The higher digital currency capitalization gets, the less of a significant influence the major traders have on the cryptocurrency prices, and vice versa.

Supply and demand

As with most commodities, supply and demand influences crypto prices. For example, the Bitcoin market is heavily affected by how many coins are in circulation, and of course, how much people are willing to pay.

Bitcoin is designed to have a maximum supply of 21 million coins, at which point it will automatically stop mining new coins. The closer the circulating supply gets to this limit, the higher the cryptocurrency prices are expected to climb.

Bitcoin volatility is also driven by those investors who are holding on to their supply. It is thought that once the ‘Bitcoin whales’ – investors with tens of millions or more – start to sell their holdings, prices will plummet as other investors will begin to panic.

Most cryptocurrency exchanges have a daily liquidation limit of around $50,000. Bitcoin whales with thousands may not be able to liquidate their assets quickly enough, thus encountering huge losses and placing the market in turmoil.

External factors

Now let’s look at the possible external factors that have an effect on the rise and fall of cryptocurrency prices:

Cryptocurrency acceptance

The increase in the acceptance of cryptocurrency has seen a devaluation of fiat currencies, thereby causing a rise in the value of cryptocurrencies, in particular Bitcoin, which occupies top spot on the leaderboard of the cryptocurrency list by a clear mile.

Influencers and celebrities

Influencers and celebrities seem to have the way with it when it comes to driving the cryptocurrency prices up or down. For example, in May 2021, Tesla boss Elon Musk announced the car manufacturer would no longer be accepting digital payments due to the impact ‘mining’ was having on the environment.

Others followed suit and helped shave a few hundred billion dollars off Bitcoin’s value, incurring a bear market where there’s a prolonged price dip spurred on by the mass of coverage from the media and other concerned organizations.

The recent slump in June 2022 is said to have been triggered by a major crypto lending company, Celsius Network, freezing withdrawals and transfers, citing ‘extreme’ conditions. The cryptocurrency market witnessed a steep decline, with overall value falling below $1tn for the first time since January 21.

Global news and political events

Global news or political events can also have an impact on the rise and fall of cryptocurrency prices. A prime example is the UK’s Brexit issue. With supporters winning the Brexit referendum, an increase of demand occurred for Bitcoin and prices were sent upwards.

Others have stated that the recent dip in the market can be attributed to events in South Korea, where Warren Buffet, an influential business magnate, announced that he is certain that cryptocurrency will soon come to a sad end.

Final thoughts

Unlike a traditional investment, such as company shares where price fluctuations can depend on the performance of the business, cryptocurrency has no underlying asset.

Crypto trades are based on how people feel, a combination of FOMO (fear of missing out) and how investors view the product at that moment. Movement in crypto prices is often based entirely on speculation among investors as to whether it will rise or fall in the future. 

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Master reviewer of all types of products. Love XL Fountain Sodas!! Cheer Mom extraordinaire. Socialite to all things small town and founder of Come socialize and connect with me.

One thought on “What affects cryptocurrency rising and falling?

  • Thanks for this interesting article.

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