Five Factors That Determine the Movement of Cryptocurrencies – Introduction
If you watch the financial markets regularly, you probably see the red and green movements. The red movements happen when the price is falling while the green movements happen when the price is moving up. The upward and downward movement in the price of securities happen for a number of reasons. For example, when a company announces better-than-expected results, more investors move to buy the stock. At the same time, when the company releases worse-than-expected results, the stock tend to move lower. However, since cryptocurrencies don’t announce such results, what moves their prices?
Early this year, the price of cryptocurrencies was on a tear. Bitcoin had just reached a new high of almost $20,000. The valuation of all the currencies was almost a trillion dollars. At that time, news started coming out that regulators in the biggest bitcoin hubs were considering placing a ban on the currencies. This led to a sharp decline in the price of cryptocurrencies. It was even considered the beginning of the end of the currencies because they have never recovered. The reason for this is thar cryptocurrencies were created with the goal of staying away from government’s regulations.
Statement from influential figures
In the cryptocurrencies industry, there are a number of influential figures who can move the currencies. For example, whenever Vitalik Buterin speaks, traders listen. This is because as the co-founder of the currencies, he knows a thing or two about the industry. The same is true whenever the regulators speak. For example, when the head of the SEC speaks, traders tend to react.
Hacking is prevalent in the cryptocurrencies industry. The biggest hack was that of the exchange known as Mt. Gox. In this, crypto worth hundreds of millions of dollars was stolen. Other hackings have happened too. This year alone, cryptocurrencies worth more than $700 million has been stolen. When this happens, investors tend to sell their currencies. This is because as in all investments, cryptocurrencies is a confidence game. For example, when a company is hacked, investors tend to sell the stock of the company.
CME and CBOE are the biggest futures exchanges in the world. Last year, the two companies announced that they would list Bitcoin futures. This was a positive move for the cryptocurrency because many traders expected the institutional investors with more money to enter the business. This led to higher prices. However, reports continue to show that the demand from the investors is not very high. In fact, this has been blamed for the sluggish growth in the currencies this year.
This year, a key issue has been the launch of a Bitcoin ETF. An ETF is an Exchange Traded Fund. The SEC has been delaying the decision of allowing such a fund to be floated in the market. This is because of the risks that investors will be faced with. Traders believe that the ETF will attract new investors in the industry. Large institutions who cannot buy the currencies in the normal exchanges will now be able to buy the currencies. However, when they become allowed in the market, there is a likelihood that the price will not react as most investors expect.