AnalysisCrypto

Why Are Cryptocurrency Big Movers Are Dropping Value These Days?

Bitcoin is now worth less than $31,000, according to the Coinbase cryptocurrency exchange. This value is less than half of what it was in November 2021, when it was at its peak. The largest cryptocurrency by market capitalization is declining while stock markets worldwide are declining. As a result, Investors are running from riskier assets to safe havens like the US dollar.  In the United States, the Dow dropped by nearly 2%, the S&P 500 dropped by 3.2 percent, and the Nasdaq dropped by 4.3 percent. 

Uber was one of the companies to blame for the drops. Later, the stock dropped more than 11% after news outlets reported that CEO Dara Khosrowshahi told employees that investors were becoming more cautious. As a result, he stated that Uber would cut costs and recruit fewer employees. He further stated, “It’s clear that the market is undergoing a significant change, and we must act accordingly. The average Uber employee is just over 30, which means you’ve advanced in your career in unprecedented ways. However, you will need a new plan because the next time will be different.”

Why Are The Crypto Big Movers’ Price Dropping?

Traditional investors usually sell assets they believe are riskier, such as digital currency, and reinvest their money in safer investments when the market goes volatile. As a result of this, the price of cryptocurrency drops.

Hedge funds and money managers are becoming more involved in cryptocurrency trading, which was previously the domain of individual investors and hobbyists. As a result, the cryptocurrency market’s movements are becoming more similar to those of other markets.

Bitcoin, worth about $570 billion and accounts for roughly one-third of the cryptocurrency market, has fallen by 10% in the last few days and more than 20% in the last week. Likewise, Ethereum, the world’s second most valuable cryptocurrency, has lost more than 20% of its value in the last week.

The United States Federal Reserve raised its key lending rate by 0.5 percent. This was the largest rate increase in over 20 years. Some investors are now concerned that inflation and higher interest rates will significantly impact global economic growth. Investors are also concerned about the impact of the Ukraine conflict on the global economy.

El Salvador and the Central African Republic made Bitcoin legal currency last year. The International Monetary Fund has asked El Salvador to reconsider allowing people to pay in US dollars and cryptocurrency. The country recently stated that people would be able to do so.

What Are The Factors Influencing Cryptocurrency Value?

The value of cryptocurrencies can fluctuate. If you’re wondering why these prices rise and fall, consider the following factors.

Node Count

The node count in a network indicates the number of active wallets. This information is easily accessible via Google or the currency’s homepage. But what is the significance of the node count? 

Many nodes indicate a strong community, and a strong community increases the likelihood that a currency will survive a crisis. Second, many nodes can show a network’s strength and decentralization. Both of these are important in the world of cryptography.

Mining Cost 

Another factor influencing cryptocurrency value is the cost of production. Miners use special computers or servers to create new tokens and verify new network transactions every day. They are compensated for their efforts with virtual tokens and a network fee.

Miners’ network activity is what keeps decentralized cryptocurrencies running. As a result, if the cost of mining rises, so will the value of cryptocurrencies. Therefore, miners should not use their resources to mine new cryptocurrency tokens if the rewards are insufficient to cover the costs and make a profit. However, this is not always true and does not apply to all cryptocurrencies, so you should do your research before deciding.

Cryptocurrency Exchanges

More people will buy and use a token if it is available on many cryptocurrency exchanges. However, if you need to trade a cryptocurrency token on two or more exchanges, you must pay a fee for each exchange. This will increase the transaction fee of your investment.

Competition

Every day, new tokens are created, implying an increasing number of cryptocurrencies. Some of these new coins are solid cryptocurrency projects that could help solve a problem while building a large user base.

Government Regulations

Because some governments dislike that cryptocurrencies are decentralized and unregulated, they seek to control the cryptocurrency market. The easiest way to keep track of cryptocurrency is to tax any fiat currency used in buying it. However, because this tax would only apply to specific tokens, people who want to cash out their profits could use a different coin.

Several countries have decided that the best way to control the cryptocurrency market is to ban Bitcoin, Ethereum, and a few other cryptocurrencies. If a country with many cryptocurrency users enacts new regulations against cryptocurrencies, their value will plummet. Nevertheless, some countries, such as Japan, are said to be working on a national cryptocurrency that will encourage more people to use virtual tokens.

Scarcity

Theoretically, the price of a cryptocurrency will rise as the number of coins available for purchase decreases. However, if only 40% of the coins are in use and the remaining 60% are held back, the price may fall. Some cryptocurrency projects “burn” coins by sending them to an untraceable blockchain address. As a result, they retain control over the amount available.

Social Media 

People are aware that social media hype can cause the value of cryptocurrencies to fluctuate. As a result, prices can also rise or fall due to the news. Furthermore, influential members of the cryptocurrency community, such as Elon Musk, have influenced the value of the DOGE coin multiple times.

Even though social media is home to chaos, you can find information there. Crypto exchanges, for example, frequently post news about blockchain-based currencies on social media and warn users about crypto scams.

Source: cryptoknownmics.com

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