If you have been investing in the cryptocurrency market for a while, you would by now know how volatile this market is. Since the start of 2021, the price of BTC and other cryptos has been erratic, to say the least. The smallest and probably most minute movement will affect the prices quite significantly.
The risks and price of the crypto market
It goes without any doubt that the risks involved when investing in cryptocurrency are high. While you could enjoy high returns, you would also be subjected to huge losses within a short period of time. Since the price fluctuates quite wildly and frequently, it would make a lot of sense to try and understand what are the main factors that created this scenario. The daily trading of cryptocurrency would be the most common reason why the price would change but it would take some big decisions to move them tremendously. Here are the 4 biggest influencers of cryptocurrency price.
No. 1 – Investments or actions by big players
The price of crypto would be affected when a large investor decides to take it up. This was clearly evident when Elon Musk (in early 2021) announced that Tesla would be accepting BTC as payment (which was retracted later) and investing a large amount (some US$1.5 billion) into buying BTC. Meanwhile, MicroStrategy Inc had in August 2020 bought some US$250 million worth of BTC. Besides that, there are also influencers like Mark Cuban, Jack Dorsey and Bill Gates who could also affect cryptocurrency prices through a simple statement, an intention or any action involving the cryptos that they hold.
No. 2 – Governmental and regulatory decisions
The price of cryptocurrencies changed drastically when large economies like China banned them. The US meanwhile imposed certain regulations while several banks in the UK announced that they would stop accepting transfers to cryptocurrency exchanges temporarily. Regulations are very common as more governments are starting to take note of the effects of the digital currency market which will affect the outcome of their prices.
No. 3 -Technological or infrastructure reasons
Since cryptocurrencies are digitally managed, it is quite common that there are upgrades or enhancements done on the blockchains. When such things occur, it would naturally push their prices up since the improvements would facilitate more and faster transactions (in most cases). Meanwhile, when new crypto launches its ICO (Initial Coin Offering), its price would usually go up before normalizing.
No. 4 – Crypto Whales and their volume
Crypto Whales are the ones that scare investors the most. It is a known fact that the 3 highest Bitcoin wallets out there command up to 7% of the total in the market. If the whales decide to sell or do anything drastic, it will affect not the market but the holders of the BTC quite severely. As such, investors are always cautious and often vulnerable as they become susceptible to the actions of these whales.