Since the beginning of 2018, crypto investors have not heard the good news. The price of Bitcoin continues to decrease. At the same time, many analysts see this as a temporary phenomenon and predict a quick change in the situation. Meanwhile, there is no unequivocal opinion among crypto owners.
Many of them, albeit reluctantly, still sell the cryptocurrency at low prices being afraid that there will be a further decrease in its value. Why cryptocurrency is going down? What are the reasons for the depreciation of cryptocurrency and is it possible to make money on the collapse of Bitcoin and the digital money market as a whole? Here, we’re going to tell you everything about the reasons why cryptocurrency is going down today.
Why Is Cryptocurrency Price Going Down: The Law of Supply and Demand
Why is cryptocurrency price going down? The reasons for the incredible price fluctuations of Bitcoin or Ether — the two most popular currencies today — are not clear even for those who buy them. At the same time, these buyers influence the cost of coins as well as governments and insiders, but first things first.
Despite its uniqueness, the cryptocurrency obeys the law of supply and demand, as well as other assets. Its essence is simple. When the value of a commodity decreases, demand rises, but supply decreases. When value rises, demand falls, and supply grows. As a result, it turns out that with the increase in the value of Bitcoin to $20,000 per coin, holders tend to sell them as soon as possible. And, of course, some part of the crypto is sold.
The result is that the cost of Bitcoin begins to plummet because the volume of supply exceeds demand. After it returns to an acceptable level, demand increases and the cycle repeats again. This process is natural for market relations and significantly affects digital money, although it isn’t the only reason for the cryptocurrency depreciation.
Why Is Cryptocurrency Going Up and Down: Market Fluctuations
Do you want to invest in cryptocurrency but the instability of its rate holds you back? You are not the only one. Given the instability of the growth and decline of cryptocurrencies, often those who want to invest in cryptocurrencies begin to hesitate and doubt the market’s capabilities. One of the reasons for such doubts is the phenomenon of cryptocurrency market correction. So, why is cryptocurrency going up and down? Investors, seeing a sharp decline, begin to sound the alarm and worry. However, this is normal. Various concepts are used to indicate the current situation on the cryptocurrency market, and ‘market correction’ is one of them. It is often possible to observe how, instead of correction, one speaks of a fall or collapse of the market, however at this stage, such judgments can be considered highly exaggerated. Why is all cryptocurrency going down?
In a general sense, a correction implies some fluctuations in the market value of a certain asset — for example, currencies, stocks, or, in our case, cryptocurrencies. More precisely, the correction indicates a change in the value of the asset in the direction opposite to the trend. That is if on the cryptocurrency market we recently observed a pronounced upward trend, and then the value of Bitcoin and other leading cryptocurrencies rolls down, we are dealing with a market correction.
The most important thing is not to start panicking and not to confuse the correction with a substantial fall or collapse of the market. Of course, under certain circumstances, the correction can transform into a full-fledged market decline, but not always and certainly not in the case of crypto. The fact is that the correction as such implies a relatively insignificant correction of the previously observed trend.
When we are dealing with the cryptocurrency market, the increased volatility of which is well-known to everyone, the word ‘relative’ is crucial. If in traditional markets with low volatility, a correction above 15% can rightly be considered the first sign of a serious decline, then in the conditions of sharp fluctuations in the value inherent in cryptocurrency, even a correction of more than 50% can be considered quite normal. It’s what we observed and still continue to observe in the market.
Why Is Cryptocurrency Market Cap Going Down?
Why is every cryptocurrency going down? When investors begin to buy cryptocurrency more actively during rapid growth, the growth in its value continues to gain momentum and at such a moment becomes so high that it becomes difficult for new investors to buy cryptocurrency with the same intensity as before but at a significantly increased price. At the same time, more and more sellers appear on the market who are interested in selling cryptocurrencies at a relatively high price. Consequently, supply increases, while demand decreases, which ultimately gives an impetus to the correction of the market to eliminate this imbalance. Also, it’s no secret that the actions of large players can have a significant impact on the rate of cryptocurrencies, which, in fact, happens from time to time.
Why is cryptocurrency going down right now? It is well known that rumors can lead to consequences that may be more significant than the consequences of the event itself. This is especially true for the open market for virtual money. Built on the principles of supply and demand, crypto depends on a positive news background, which to some extent encourages users to buy or invest. At the beginning of the article, it was said that crypto investors have not heard good news since 2018. Why cryptocurrency is going down now?
Rumors about the bankruptcy of the main cryptocurrency exchanges, the negative mood of the US government and the prohibitions on advertising coins by large social networks such as Facebook, led to the collapse of Bitcoin. Of course, while bitcoin is falling, other coins may go up, but Bitcoin is key to the entire market. Other currencies didn’t come close to its market cap. In addition, negative news or rumors about other coins right now, as a rule, pass almost imperceptibly to the market in general.
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