There are many governing factors as to how the crypto markets will likely perform in a given timeframe and its repercussions can be quite disheartening to the new investors and traders. Due to its infamous volatile nature, cryptocurrencies have been a no-go for many people who fear that their crypto investment will likely turn to dust. Skepticism is good especially when you don’t know much about how crypto markets do what they do, but acting wisely is better. Let us talk about the five important aspects which are quite a deterrent in the way the entire crypto trader and investment ecosystem should be wary.
The five defining factors in crypto investments are as follows:
Capital flow, demand and supply, and technical analysis are some of the key indicators that cryptocurrency traders use to make trade decisions whilst trading and investing, but crypto’s market factors have been given special attention as opposed to other social influences that have been largely neglected. One of the factors is market correction. Price corrections impact crypto traders in different ways. Protecting your funds from dramatic price falls while trading becomes very important than the goal itself.
Traders may face a lack of reliable statistics and market indicators, which is very important in these corrective states of the crypto markets. Harder to predict price drops, crashes, and rises affect day traders the most as opposed to long-term traders who can sit through market movements and wait for the price to recover.
Unlike the stock markets, equities, and other traditional markets where traders can calculate risks and rewards based on the underlying company financial value, or gauge the position of a country’s growth by assessing its economic statistics, crypto traders face limited data to zero in on the best trade channels and moments thanks to high volatility. User sentiment in this condition is subject to shift at an enormous rate. One thing that every trader must remember is that user sentiment can wreak havoc in the crypto markets as crypto may rebound, but the sentiment may remain diminished.
Cryptocurrencies are speculative assets, and much of their price is determined by hype and FOMO. It takes feasible market intelligence to speculate with a higher degree of assurance that the market will go in a certain direction, which is very important to determine if you’re a beginner. Using data and statistics like in the image above, one can tell that the markets nearly tripled in terms of bitcoin to UDST trade, which tells us the trend is likely to continue for a time.
Organized Market Influence
Organized market influence is a kind of deliberate market pressure that ensues after a planned pump or dump scheme. It has happened many times in the past and has cost investors their fortunes, but not to the smart ones. Investing in crypto markets is just like buying fruits, you don’t know if it is ripe inside, but you buy anyway, and the vendor takes no responsibility. You have to have a keen sight of telling the fake ones from the ripe ones, and the same is with crypto. You don’t have to fall for hyped news as they are meant to capture investor sentiment by manipulating public perception.
Many digital assets including bitcoin have suffered severe price fluctuations after FOMO news and market influence, which then induces a huge selling frenzy among investors and traders. The most infamous instance of this manipulation could be attributed to China banning its crypto exchanges in 2017. Many coins toppled in value, and investor sentiments were lowered in Asian markets. These conditions deprive new traders of confidence and cause them to make mistakes. Haphazard buying and selling frenzies often twist the market forms and make uninvited corrections.
Economic factors such as currency devaluation and inflation have been responsible for market stagnancy, but the same global economic crisis in the late 2000s gave birth to bitcoin. Gold which is the largest store of value in the whole world, saw a decline of 12% of its value while bitcoin suffered a sharp decline of 40% in the wake of coronavirus economic instability. The unstable economic activities have a ripple effect on financial markets as investors turn to other alternatives and pull out their crypto investments from the bets which they consider unlikely to succeed. The same happens with cryptocurrencies; the irregular market corrections, correlations with other assets, and imminent volatility impact the crypto sphere negatively, and traders and investors who don’t have a perfect exit strategy can incur losses.
FUD Within Crypto Investment
Almost every corner of the traditional and crypto investment sphere is inundated with fear and panic at the moment. Nobody is sure whether their investment appetite will be quenched, and investors are getting overly concerned about their tradeable assets. Investors and traders should remember that they should not allow fear to creep in, or they could end up lamenting over losses. FUD represents the market sentiments especially when the prices are plummeting, and there is no credible resource to act upon. This fear induces a bear market, and no investor buys that assertion anymore. The rest of the HODLers see the price plunge and decide to sell off their assets as well.
Many ICOs duped their own investors in the name of hype and profits and contributed nothing to the community except a token and an inconsiderable roadmap. According to leading sources and research, as high as 81% of ICOs failed before they reached exchanges to trade and only 4% of the total ICOs managed to get listed on exchanges and provided optimum ROIs to their investors. That’s the stark reality of the crypto markets, but new laws and policies are creating a more resilient and safer crypto environment for traders and investors.