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Reasons for Rise and Down of Cryptocurrency – Essential to Go through for Cryptocurrency Investors

Cryptocurrency market is much preferred by investors who are below 40 years of age and hardly take risk in losing money. As soon as they notice down, they start withdrawal and the market of cryptocurrency become instable in that situation.

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By Mystic Vivan
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The Cryptocurrency or crypto currency (one of the digital currencies) has become a hot topic in financial domain that has made its debut remarkable; while witnessing the rise and fall. If compared to other financial markets, the cryptocurrency market is more unstable because of having no fundamentally valuable currency options. In simple word, there are no costly metals (like gold, platinum or silver) and diamonds or fiat money to back the value. If you are planning to invest in crypto or want to be the player of this financial investment, it will be crucial to gain an understanding of supply and demand procedure and some other factors that are involved in the investment of crypto markets.

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Rise and down of cryptocurrency depends on varied factors.

  • The cryptocurrency market is more unstable because of having no fundamentally valuable currency options
  • In the November 2021, the cryptocurrency market touched new heights of reaching the US $3 Trillion.
  • In the year 2022 in the months of May and June, the market capitalization fell by more than US$2 Trillion.

An Introduction to Cryptocurrency Crypto Market

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As far as cryptocurrencies are concerned, such digital currencies started as a novelty and became a global craze – as an alternative to regular currency. This mode of digital currency attracts and repels investors.

Bitcoin changed the way of cryptocurrency – created by Satoshi Nakamoto in the year of 2008 on 31st October. Gradually the digital assets conquered the world and resulted in market that touched new heights of success. However, in the recent years, rise and down cryptocurrency is common – mainly because of the high instability. This is the main reason, investors preferred to deal with lower volatility markets; while see cryptocurrencies as high risk investment. This is the main reason they reluctant to invest in cryptocurrencies. 

Year Wise Ups and Downs of Cryptocurrency

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The year of 2017 was truly wonderful time for investors who earned something beyond their imagination. In the year 2008, Bitcoin crashed. It was the time, when cryptocurrency market saw something similar with the crypto crash in May and June months in the year 2022. However, the huge surge in the month of November in 2021 gave investors a better chance to turn their money into big profit.

In the November 2021, the cryptocurrency market touched new heights of reaching the US $3 Trillion. But, in the year 2022 in the months of May and June, the market capitalization fell by more than US$2 Trillion. In June 2021, the price of Bitcoin was around 30, 00,000 Indian Rupees that jumped to surprisingly new figure approximate 54, 00,000 INR in October 2021.

The increase approx 70% in just four months draw attention of investors and market; while it fell to around 45,00,000 INR in the first month of 2022. It started dropping and in the month of June 2022, it was around 15, 00,000 Indian Rupees. Some other cryptocurrencies witnessed a hike like Dogecoin, Solana, Avalanche and different others. There were also some cryptocurrencies that witnessed a heavy loss of around 90% of their market value.

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According to experts, in the last of 2022, the total cryptocurrency crypto market was on around $850 Billion capitalization. It happened due to confluences of different circumstances that contributed to the cryptocurrency market crash in 2022. 

  • To some level, the global inflation and the interest rate hike by FED also played a key role in the falling of cryptocurrency capitalization.
  • The War between Russia and Ukraine was also main culprit behind the fall of cryptocurrency.
  • There were also many other factors – affected stock market that impacted cryptocurrency.

The rise and fall of cryptocurrency may be common because crypto assets are totally based on ideas with the thinking of people to exchange outside the confines of conventional banking transactions or government restrictions. This is the main reason; cryptocurrency is neither blocked nor regulated by any central authority.

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How Do Cryptocurrencies Get Their Values?

Cryptocurrencies got their values from diverse sources like supply and demand with commodities, production cost and availability on exchanges along with internal and external governance.

  • As far as prices are concerned, they are governed by the laws of supply and demand.
  • If demand increases, the cryptocurrency will increase.
  • Here, you should also know about the facts that drives supply and demand of cryptocurrencies.
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International currencies are under the government authorities; while cryptocurrencies are developed by Mining through computers and graphics that operate 24 hours a day with the main motive of making coins available to users.

It is achieved by the complex algorithms – solved successfully. If the computer stays active and work for more time, the more cryptocurrencies can be collected. This is the main reason, supply is resolute the number of new coins – created and the number of existing owners who wish to sell them.

“Cryptocurrency for beginners” is a commonly search term, but before involve in this option, you should keep in mind that monetary policy of each crypto is different and usually announces its plans for minting and then burning tokens to regulate supply.

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Bitcoins has taken a step further in this process and set a ceiling of 21 million Bitcoins.

Ether has also set some dimensions – no limit but pay to include their term Under Blocks to contest centralization and improve Blockchain efficiency. The instability issues are also rising because of the limited supply of some currencies.

Bitcoin influence the rise and fall of crypto markets – through involvement in buy and sell the large amounts of cryptocurrencies.

Amid the rise and fall of cryptocurrency, the demand has increased to next level and expected to increase because of accepted in varied ways and for different types of transactions in the form of payment. It is also considered as the right investment instrument – increasing demand and limiting supply.

Most of the cryptocurrency beginners are young age people who want to manifold their profits and wish to earn something more. They tend to invest for quick profits and based on sentiment. If they find possibility of losing the big sum, they usually exit the market. This is the main reason behind rise and fall of cryptocurrency and market instability.

Demand matters a lot in crypto market

  • The demand will increase, if this digital currency is more useful.
    Not to mention the production cost that determines the prices and value of such digital currencies.
  • Tokens also matter a lot in crypto market and generated trough mining by using a computer and solving the mathematical problems – mainly to verify the next block on the Blockchain.
  • You as an investor should also keep in mind that price also depend on the number of exchange platforms – available.
  • Price variation may also occur that depends on the price governance – from government regulations to legality of the currency.

If government legalizes the currency, the price will start increasing. If government prohibits the use of such currency options, the price will start decreasing. Internal governance of each Blockchain also matters a lot in defining the price.

Cryptocurrency network is broad and comes with some rules – mainly with governance tokens that give their holders a clue for the future of the project and its growth. If any change is required in the governance, all interested parties must agree on this. There are varied other things that matters a lot in price change. The cryptocurrency market is more unpredictable in comparison to financial market.

In this way, investing in crypto means same things as in any other situation, how supply and demand works and factors involved. Whether it is a financial bubble or a promising market, situation can be any one.

If you are going to invest in cryptocurrency, you should consult with experts and take every step carefully.

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