The crypto market has already attracted many people’s attention and continues to gain popularity. Lots of new investors are interested in getting into the crypto world, but there are serious risks involved. Therefore, it is important to understand the main factors that influence market trends.
The media is one of the most effective ‘weapons’ to manipulate the public. Whether traders or not, the news influences everybody on a daily basis. But the influence does not always have to be negative. Sometimes it even helps us make better decisions. On the other hand, we may get scared and hold back from doing something. Not all of our decisions might be smart.
As people control the market, the market acts the same as its controllers. So, if the news scares people, the markets will also get scared.
News and Fear Factor
As we already mentioned, the news plays a huge part in the direction of the market. Economic news makes the most significant impact, as it is directly related to finances.
Economic turbulence usually brings either extreme market rise or fall. During financial instability, some traders buy more shares and raise the demand for purpose. Traders who base their decisions on fear and euphoria, end up falling for this trick and buy more cryptocurrency.
Political news also has a huge impact on the crypto sector as the political environment can seriously destabilize the market. For example, during the U.S.-China trade war, cryptocurrencies have been suppressed in China.
Politicians themselves influence markets as well, due to their impact on the people. For instance, cryptocurrency has become a new addition to Donald Trump’s tweetstorms. His negative opinions regarding crypto lead to a drop in cryptocurrency markets.
News is not the only criteria influencing the general public. The University Of Notre Dame and the Pacific Northwest National Laboratory study the correlation between crypto prices and forum discussions.
The study showed that during intense forum discussions, the prices rose. Furthermore, the correlation between traders discussing cryptocurrency and traders buying cryptocurrency was quite high. As a result, the research showed how can traders influence each other. For example, if several traders say that it is an excellent time to buy, many traders might follow.
Forums have had a considerable influence on the market. In 2017, when Bitcoin hit its all-time high, people were very active on sub-forums before and during that time.
Safety and Regulations
A huge factor that also matters to the market is changes in the safety of cryptocurrency. Things like hacker attacks, system breakdowns, the closure of exchanges are difficult to track and impossible to predict. Just one mistake in the code and holders can lose their funds in wallets. As a result of these risks, many traders think regulations are necessary. But others disagree as no laws create the beauty of cryptocurrency. The fear of having to deal with unpredictable risks on top of the unregulated markets keeps many traders away from cryptocurrency.
The general acceptance of cryptocurrency is one more criterion influencing the market. Once people start to integrate crypto into their daily lives, the market will stabilize just like a regular fiat currency. The market will stay volatile, and only a few people and businesses will control it until the application of these coins becomes as easy as using dollars.