The Crypto industry has now existed in the world for more than a decade. This industry came into play after the recession caused by the collapse of the big company known as LEHMAN BROTHERS that was a financial institution. This is when the white paper for the digital currency named BITCOIN was published. The white paper highlighted all the necessary things and also about the failure of our banking system.
We know the paper money we use for buying and selling has value because it is ensured as per central banks, otherwise it would have been a piece of paper that we just use and throw. The cryptocurrency brought the boom in the traditional banking system by providing the world with a currency that no one had ever thought of. This currency had certain features that attracted people to invest in it.
Some of such features are:
- There is no mediator to provide any assistance
- Blockchain-enabled technology
- Cryptographic protection
- Keys provided to open and converse the cypher texts
- It is virtual, as there is no physical existence
- It can be used to buy goods and services in certain countries
Reasons for fluctuation?
The law of economics
The law of economics we often hear about is: ‘THE LAW OF DEMAND AND SUPPLY’. This law is one of the most famous laws of any market. The crypto market as well is driven by the law of demand and supply. If more people were selling the cryptocurrency, say bitcoin, and fewer people buying it ordinarily, the price would go up and vice versa. Hence, we can say the demand and supply of a currency play a massive role in its price fluctuation. Before investing in bitcoin, you can read about the History of Bitcoin.
Every time there is bad news in the market, let’s say about a scam or hacking taking place, it always affects investor’s confidence and has an opposite effect on the price of currencies. But if there is good news about any respective currency it tends to inflate its price. In both cases, the effects may vary causing the fluctuation in the price of a currency. For example, Elon Musk accepting payments through Bitcoin in Tesla had resulted in a huge price spike of Bitcoin.
The economy also plays a big role in cryptocurrency price fluctuation. If the economy is stable and the GDP ratio is high, they will tend to invest in platforms that will be more beneficial. People’s first choice after the recession has become the crypto market. So, if there are more investors naturally there will be price fluctuation.
Roles played by big investors
There is a huge role that these big investors play in the price fluctuation of cryptocurrencies. If there are investors who have a big chunk of coins in their wallet and they sell it, the potential of price going upwards and downwards is high. Say for example DOGECOIN. Dogecoins price fluctuation has immensely grown because of the support that it is getting from the big names such as ELON MUSK, SNOOP DOG, MARK CUBAN, etc. If we talk about Bitcoin when Elon Musk allowed Bitcoin trading in Tesla it had surged the price of bitcoin to the next level.
Security reasons also lead to price fluctuation. If there are any security breaches taking place people will tend to sell at whatever cost they get, and if everyone around the crypto industry would do it. It will lead to huge price fluctuation.
As we know the crypto market is way too volatile, we must invest carefully. Keeping in mind the price fluctuation, there is one suggestion ‘hold your wallet carefully’.