Every day, hundreds of cryptocurrencies and ICOs enter the market following a big crash or due to some marketplace information. Every day more die as well because they can’t compete with others. The cryptocurrency economy is vast, decentralised, and dynamic because cryptocurrencies are often tied to significant global events that can impact their prices.
When nations go to war, for example, the value of Bitcoin and Ethereum often surge as investors seek safe havens for their money. In this article, we’ll look at all key factors – inflation, regulation, merchant adoption, etc. – that have impacted the crypto market over the past month.
1. Inflation – Spice Things Up!
Inflation is a measure of how much prices change over time. Inflation can be calculated as the percentage difference between the cost of goods to consumers and their value when measured over a period at an earlier date.
The amount of money an economy has available for spending also decreases if prices are higher than before, and this causes less demand for goods and services.
Inflation is measured using the consumer price index (CPI) or producer price index (PPI). Simply put, inflation is when a country’s currency loses its value due to an increase in the money supply. Inflation leads to a devaluation of money, where it becomes worthless over time.
Cryptocurrency exchange rates are volatile by nature, which means they change in real-time. The cryptocurrency market can be affected by inflation, so investors and traders need to understand how these two things work together.
It turns out that inflation affects the price of cryptocurrencies in two ways: expansion and contraction.
When prices rise during an economic expansion, the cryptocurrency market expands because new people can afford them, and people who already own cryptocurrencies might put more into their investments.
When prices are going down during a contraction (such as after a recession), the crypto market contracts because people liquidate their assets.
2. Regulation – A Major Factor
Crypto markets are still unregulated, and some regulations are already in place. However, the regulations have been in a constant state of flux, owing to the rapid evolution of this market.
The regulation imposed on the crypto-trade has caused an expansion and contraction in the market. The expansion can be seen with an increased number of persons entering the cryptocurrency trade and, at the same time, with more money flowing into cryptocurrency ventures. The contraction of crypto markets can be seen when regulatory authorities shut down or restrict trade that may be considered illicit or fraudulent.
3. Merchant Adoption
Cryptocurrencies are currently in the middle of a bull run as merchants continue to adopt and contract the crypto market.
The volatile nature of cryptocurrencies can be seen throughout the past decade. Significant fluctuations in prices can be attributed to events such as merchant adoption, bitcoin ETFs and regulations.
It can be challenging to predict what will happen next, but the future of cryptocurrency looks promising, with more and more merchants adopting them as means of payment.
As for how merchant adoption expands and contracts the crypto-market, it will be a crucial question in determining whether a cryptocurrency will succeed.
If people don’t have an easy way to spend their cryptocurrency, then you won’t see it being adopted as much. There are many use cases for cryptocurrency, such as investing through trading bots like the quantum ai or speculating on markets. However, if cryptocurrencies are not easily spent with merchants, they become less valuable because they can’t be used daily.
4. Media Attention
The recent surge in media attention towards cryptocurrencies, Bitcoin specifically, has made it one of the most popular topics on the internet. News outlets covering Bitcoin have seen an “exponential growth” as they have increased their coverage of the cryptocurrency.
The media attention on Bitcoin also impacts how much the crypto-market expands and contracts – when a bitcoin reaches new highs in price, and it might be because of all the media hype about it.
Media attention can expand the market by increasing new people joining the crypto space and projecting their confidence. It can also contract it because of misinformation. For example, if retail investors hear negative news about a specific cryptocurrency, they may sell their position and leave the market.
In a nutshell, media attention is essential for the crypto market, as it reflects the interest in a particular cryptocurrency. Without this awareness and knowledge, new cryptocurrency users would not be able to decide on whether they should invest or not.
5. Public Opinion
Public opinion can have a significant impact on the prices of cryptocurrencies. People who can share their opinions about a given cryptocurrency on social media platforms make it possible for other people to make informed decisions.
Public opinion’s effect on the crypto-market expands when people find cryptocurrencies like Bitcoin more credible than before because of their colossal price increase or when they read or hear about the potential benefits of using digital currencies. The market contracts when people lose confidence in Bitcoin and other cryptocurrencies due to an increased number of hacking cases, regulatory uncertainty, or public mistrust.
6. Scams/Hacks – Setback?
The cryptocurrency market is constantly expanding and contracting. Scams and hacks play a significant role in this volatility. When a scam or hack occurs, investors often sell their cryptocurrencies, which causes the market to contract. Conversely, when a new cryptocurrency is introduced or when a positive development occurs in the cryptocurrency market, the market expands.
This article explored the factors that can impact the size of the crypto market. Some of the critical factors mentioned include regulations, innovation, and market manipulation. By understanding these factors, you can make more informed decisions about your investments in the crypto market.