Getting into the world of cryptocurrencies and starting to invest in virtual coins is a gamble and this type of investment is not for everyone. To start putting money in the crypto market, you first need to know that there are certain risks that you must take.
Depending on the risk you have taken in the future you can expect it to pay off or you may lose the stake you paid.
If you have been following the crypto market well enough, you have probably noticed quite rapid price fluctuations in the crypto currencies. Of course behind these ups and downs, there are logical explanations that can clarify the movements of their values in the market. Many of the investors in which they would be overjoyed when they wake up in the morning and notice that the price lines are in a green wave, ie growing. There is nothing better than this feeling. However, it can often happen that almost all the coins fall into the red zone, ie the curve moves down. While this may not be a great sight for crypto investors, these price drops may depend on a number of factors.
Today we will try to explain to you why these so-called declines in cryptocurrencies are happening in the market. So if you are one of the newer investors in the crypto market, our recommendation is to stay until the very end, because we have a lot of interesting information that we will share with you today.
Although it is virtual money, there is no entity in any country that can regulate the crypto market. In every country, there is a national bank that is in charge of the price, the amount of money that is printed and put into circulation, monetary policy, payment systems, and everything related to the money that appears in a country. Thus, this national bank has the right to adopt rules and regulations according to which the monetary operations will be regulated.
In the world of cryptocurrencies, there is no such entity that can regulate the exchange of currencies. However, the government of a country can pass a law banning mining, thus influencing the cryptocurrency market. Last year we had the opportunity to witness such a case when China passed a law banning the mining of any cryptocurrency. This further caused a drastic decline in the crypto market, as well as the values of cryptocurrencies.
Rule of supply and demand
As in economics and business, there is a rule that says that if the market demand for a particular product or service increases, this interest automatically raises the price of that product or service. Conversely, if demand for a particular product decreases, this will affect the supply and price of the product. The same rule can be observed in the case of virtual money. When there is an increased interest in investing in cryptocurrencies, we can see that their value rises dramatically.
When the demand for crypto decreases, this affects the supply, ie mining, and we can immediately notice how the value of bitcoin or some other coin immediately decreases in the market, as is the case at the moment. To stay up to date with currency values and start investing at the right time, we recommend a visit here. It is a free application that allows you to quickly and safely trade virtual currencies at any time.
Decisions of influential people or companies
Do you remember a years ago when Elon Musk announced on his Twitter account that in the future his company would allow its customers to buy Tesla cars with bitcoins? His move to support such product-buying transactions created a real boom in the market and the value of cryptocurrencies suddenly jumped.
Imagine now a situation where he announces that from now on such transactions are discarded. We can expect a complete decline in the crypto market. Such information and decisions have a huge impact on the way coin prices move. Not just Tesla, imagine if all the companies that have enabled these types of transactions so far announced that you would no longer be able to pay for their products and services through your wallet. This would cause a huge crash in the market and the values would start to fall sharply.
We are witnessing that new coins and tokens appear on this market every day. If ten years ago there were only a few that we could count on one hand, today there are thousands. But not every one of these coins manages to survive in the market. This happens for one reason, and that is that the competition is really huge, and not every project can deserve its place in the market.
Besides, no new project can overshadow the original coin from which this whole story began, which is the bitcoin. The appearance of new coins can drastically affect the value of others that are current. However, we believe that this impact is short-term and can not cause any of the current coins to completely fail.
Prices of mining tools
To be able to produce tokens, you need to use the mining process. Mining is a process that involves electricity as well as a good computer configuration. We are witnessing drastic increases in electricity prices as well as computer parts whose price has almost doubled since the corona pandemic began. We do not hope that these prices will start to fall in the near future, so those who have participated in the mining process so far will probably give up because this is not profitable for them. The prices for the equipment needed are huge, and the value of cryptocurrencies is declining, so they would be at a loss instead of a profit. This will further reduce the value and cryptocurrencies will decline.
These are just some of the reasons why we can see a decline in the virtual currency market. However, these factors should not discourage you from investing in them. If you follow world events, they can help you guess what might happen next in the crypto world.
Use this information to choose the right moment when you need to invest in them and make a profit.