What makes Cryptocurrency go up or down

2022 has been a terrible year for cryptocurrency investors, with several funds being wiped out in the liquidity blitz. Exchanges have simply run out of cash to settle investors in one of the most widespread digital asset sell-offs in recent times.

Even the prudent investors that take their time to study charts and a coin price tracker to monitor their earnings have been forced to salvage what they can. Such has been the bearish run that has seen the premier token, Bitcoin, fall from its lofty heights of $60,000 to just over $20,000. Altcoins have not been spared, with many plunging far enough to become redundant. 

Are you planning on going into cryptocurrency, and do you want to know the right things to do for you to make a profit out of it? Then you have come to the right place. A lot of people have made millions by making the right decisions. 

You might have heard or witnessed people who have made losses more than profits due to an inadequate understanding of profit strategies. This article will guide you on cryptocurrency investment tips that will enable you to make profits.

The media and influencers

Media is any channel of communication that passes information in the form of printed paper, news, educational content, and any form of information.

The media can create positive and negative impressions about cryptocurrency, especially when an influencer makes a positive remark about it and gives you reasons why you need to get it.

Many people will eventually get it because influencers are people society looks up to. The more people purchase it, the more the value increases. In the same way, Elon Musk contributed to the spike in Dogecoin’s value.

The same thing applies when an influencer paints cryptocurrency negatively to the public. The number of people still interested after getting the information will be very few, leading to token devaluation.

The burning of coins

Burning is a term used to describe the act of reducing a certain amount of tokens out of circulation in other to increase the value of a particular token in circulation. If a large number of coins are burnt, it will lead to a scarcity of that particular cryptocurrency, and it will lead to a reduction in the supply of the cryptocurrency.

If there is a limited supply of the coin, the sellers can increase the price of the currency, and the buyer will have no other choice than to buy the token because of the limited supply and few sellers.

Acceptance of Cryptocurrency

When many companies actively use or accept cryptocurrency for financial transactions, the demand for it increases, which will positively impact the price.

Similarly, tokens that have yet to be accepted in blockchain communities tend to have reduced value, no matter their market supply.

Demand and supply

The price or value of any stock can be determined by demand and supply. The more people want it as a medium of transaction, the need for cryptocurrency will increase.

Crypto news tokens such as Bitcoin have limited supply and thus have high values as a result. On the other hand, despite a seemingly endless supply of tokens, many altcoins that flood the market today will never have their values rise considerably.

The reason is simple- the demand is not high. Many factors contribute to the demand for a token, one of which is its trustworthiness and utility. The more uses a token has, the higher its value will be.

The risk of investing in Cryptocurrency

Many people fear putting their money in cryptocurrency because it’s new and unstable. They are afraid of investing in cryptocurrency and want to make money out of it.

Many people have lost money in crypto. When others hear of the enormous amount of money they lost, they become discouraged from going into crypto.

In a bullish market, you’re likely to profit more than lose. However, you should never forget that it usually takes a lot of time before cryptocurrency can become more stable and less risky to invest in.

If people aren’t scared of investing in cryptocurrency, increased interest, trading activity and better liquidity will affect market prices, driving value higher.

If you plan to invest in cryptocurrency, you must consider your risk tolerance. The increase in the number of people who invest in crypto can lead to a rise in value.

The Increase in cybercrime

Today, hackers can steal cryptocurrency because it can easily be transferred and is untraceable.

On 29th march 2022, a gaming-based crypto network called Ronin Network was hacked, and a massive sum of $625 million was stolen. The heist was one of the biggest cryptocurrency heists to date. The company said the validator nodes were compromised while the funds were drained in two transactions.

During this period, many people were temporarily discouraged from investing in the affected token, whose value was badly affected.

Cybercrime is one of the reasons people are scared to go into cryptocurrency due to the fear of losing their investment to fraudsters. It will lead to the value of crypto falling significantly.

Government regulation

The government does not fully support cryptocurrency because of its decentralized nature. Cryptocurrency’s decentralized nature makes it very easy to do illegal activities with it.

Some organizations are trying to regulate cryptocurrency, but the government feels it’s too early to create laws to govern cryptocurrency transactions.

The government wants more data on the number of people who use cryptocurrency to make transactions before they start making rules about it. In time, this will affect the value of cryptocurrency because if the government makes it too difficult to use, only a few people will want to buy or invest in it.

Moreso, if the government made it illegal to use cryptocurrency as any form of payment, it would be no more supply because people would not have any reason to mine cryptocurrency anymore. It could cause a significant decrease in its value.

Community support

An active and engaged community is one of the most vital assets a cryptocurrency project can have. The number of active users can determine any product value.

Governance tokens are decisive in allocating control for blockchain projects among community users with the fast growth in technology. The cryptocurrency sector is unlocking new patterns for organization and ownership.

Usually, the tokens are equal to the size of the stake and empower the holders. If there are relatively high numbers of holders, it will increase the token’s value.

Pumping and dumping

Because of the relationship between demand and supply, the price of crypto can be easily manipulated. The effort to match all the open orders on particular crypto across several exchanges will create a false shortage.

When the market adjusts, the price will rise. Investors who purchased more of that crypto can then cash in on the gains by dumping their coins, decreasing costs. Although exchanges know about these methods, stopping them isn’t easy, as the perpetrators know how to stay under the radar.

Crypto-whales

The large cryptocurrency holders are usually called whales. Whales can also cause price volatility increases, especially when they move a large quantity of Crypto into one transaction.

For instance, when these whales sell their Bitcoin for fiat currency, the lack of liquidity and large transaction size will create downward pressure on the token price because other market participants carefully observe the transactions.

Trading activity

The activities of traders can significantly affect the rise and fall of cryptocurrencies. The middle traders depend on the major trader’s decision to buy, sell or hold.

The more traders buy a particular cryptocurrency, its value increases, and the less they buy it, the more it loses its value.

Furthermore, major traders manage price fluctuations through tools subject to appropriate market conditions.

Competing cryptocurrencies

There are different cryptocurrencies, with new projects and other tokens launching daily. The obstacle to the entryway is relatively low for the new rivals, but producing a viable cryptocurrency also relies on building a network of users that uses the token.

A blockchain application can quickly assemble a network, especially if it improves upon a boundary of a competing application. If a new rival gains momentum, it takes value from the existing competition, thus sending the incumbent’s price down as the new competitor’s token sees its price move higher.

Conclusion

Even though it’s pretty challenging to predict the rise and fall of any currency, it isn’t entirely impossible to mitigate the risks of loss or increase the chances of gain. Following the proper guidelines, even a novice to the crypto market has a shot at making some amount of progress in making profits.

Whatever your reason for wanting into the crypto space, be it security of transactions, reduction of third-party charges, anonymity, or the prospects of making more money, we hope our article helps you find your space and attain your goal.