We’re just over halfway through 2022 and it has really been a rollercoaster for the cryptocurrency market! But why is that? What has been causing the fluctuations in the market this year?
Well, there’s no one answer…but let’s explore a few.
4 Cryptocurrency Market Fluctuating Causes
Banks and Politics
We have covered this topic in previous blogs. However, banking policies, politics and laws will continue to have an effect on the cryptocurrency market until they begin to be more accepting of cryptocurrency.
Whilst we are making steady progress with countries making cryptocurrencies like Bitcoin legal tender, and banks in world-leading financial countries such as Switzerland having crypto-friendly accounts, not everyone is ready for it yet.
Countries such as India and China have a variety of strict rules and regulations on cryptocurrency. Whereas countries such as Portugal, El Salvador, and Switzerland are ahead of the times with their laws, banking, and capital gains taxation.
The growth of cryptocurrency adoption and awareness is forcing banks and governments worldwide to take it very seriously and look into its laws and regulations to decide what stance they should take on cryptocurrency.
Investors and cryptocurrency creators alike are affected by the decisions made by these higher powers, the crypto world eagerly watches them. Their decisions can have the power to cause a negative or positive impact on the cryptocurrency market.
Covid Recovery
Most of the world is still in a state of economic recovery from the Covid-19 pandemic, in fact, unfortunately, a lot of countries aren’t in recovery still, there are many entering worse states and are even close to a recession. Inflation across the world is at an all-time high, and businesses and people alike are feeling the pinch.
This has caused a knock-on effect on markets such as the cryptocurrency market, stock markets and more. The cryptocurrency market has recently experienced the longest cryptocurrency extreme fear period in history, with a recorded period of 7 weeks of extreme fear!
This has also been nicknamed the cryptocurrency winter, which is ironic given we’re coming up to August! The crypto winter has seemingly come to an end with the crypto markets bouncing back in the past week. That’s not to say of course that the market has stabilised now. Each day this week seems to have brought new highs and lows. Such is the volatility of the crypto market!
Fossil Fuels
Now, this may not be a factor you considering affecting cryptocurrency. However, across the world, the cost of fossil fuels has risen to the extreme! Many countries such as the UK and USA have been suffering with petrol and diesel prices being higher than ever. Add on top of that the rise in gas and electricity prices and you’ve got a serious energy crisis worldwide.
A mixture of supply and demand, coupled with inflation, has caused a big pinch for everyone. One of the things that will likely have been affected slightly by this is cryptocurrency mining. If you are a Bitcoin miner whether you do it on a small or large scale you’d better be prepared to have your bills go up almost double, if not more in some countries!
This could have a knock-on effect on the amount of cryptocurrency being mined which in turn could have a domino effect on the trading and investment markets.
You could also factor in that fewer people might buy into cryptocurrency due to the price hikes as they may not have the spare funds to invest till the economy recovers.
The Cryptocurrency Community
The cryptocurrency community is one of the strongest driving forces behind the peaks and troughs in market values. Without traders and investors, cryptocurrency would be pointless. As with any digital asset you need a community of investors and advocates in order to grow and succeed.
Cryptocurrencies can do this through a variety of methods - the promise of value or return on investment, core beliefs such as Nano with their aim to be green, growth and technological innovation as seen with Ethereum, and many more.
Both good and bad things can happen to a cryptocurrency, it was seen recently with LUNA that it is possible for a cryptocurrency to completely collapse. Then on the reverse side, you see cryptos such as Ethereum, XRP, Shiba and more that appear to have an almost unbreakable community.
It is important when investing in cryptocurrency that you research it and understand the people/company involved with it, its technology, and its community so that you know who or what you are investing your money into.
Cryptocurrency whales can cause fluctuations either by buying in big to a coin/token, or withdrawing their funds from a cryptocurrency as these will have a big market value impact whether it’s positively or negatively.
Summary
It is easy to see that over the course of 2022 that the market is extremely volatile this year and is likely to continue to be. The nature of cryptocurrency itself insights fluctuations which is why it is important to ensure you are well informed before choosing to invest.
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