Guided list of causes for the crashes in the Crypto Markets

Welcome, crypto enthusiasts! Have you been keeping a close eye on the crypto market lately? If yes, then you must have noticed that things are not looking well for crypto investors. The capital market is not looking favourable. As of now, it feels no less than a rollercoaster ride; one day, the market is going up, and then the next day it might go down, marking your portfolio red. 

The blog here will explain the reasoning behind these market crashes and what you can do in a situation like this. 

Why Crypto Market Crashes?

Crypto market crashes can be sudden and overwhelming, especially for beginners in the crypto industry. But what people fail to understand is that every low or dip in the market is due to a list of factors affecting it. These factors range from macroeconomic shifts and regulatory news. 

Getting to know what factors have the direct affect over crypto industry will help you plan your finances better. Below is the list of reasons that might be affecting the market. 

Government Policies

The government policies around the world change from time to time, and it has a direct impact on cryptocurrencies. To lay it out simply, whenever a big country like the U.S., China, or India announces any update in the regulation, or even hints at crypto banning. The investors get a shock of their lifetime. For instance, if a government says that it is trying to crack down on the crypto market or wants to charge more taxes on profits, people will panic. This will lead the investors to sell their coins quickly in panic, resulting in a significant drop in prices.

Economic Changes

The Crypto industry is not bubble-wrapped or bulletproof; it does get affected by the things happening in the global economy. Whenever you observe high interest rates, inflation, or a market crash (stock market). Investors will instantly pull out their money from risky assets and then transfer it into safer and more secure options such as gold or bonds. Let’s take another instance; if there is a rise in interest rates by the U.S. Federal Reserve, people will not be attracted to it. Volatile markets in crypto do not appeal to investors that much. In fact, it might result in the sale of assets. 

Move By Big Investors

In the cryptocurrency industry, big whales refer to individuals who possess a substantial amount of cryptocurrency. Therefore, whenever a big whale decides that they want to sell a huge number of coins, supposedly their Bitcoin or Ethereum, then it will result in an abundance of these assets in the market, which will eventually lead to lower prices. Now, think if someone just randomly decides to sell his 40,000 Bitcoins, it will make everyone too nervous to make a move. What do they say about the  Domino effect? You might as well get to see it right here,  when some people will start to sell their coins as well. 

Panic Arose because of the Media

The media always loves a good gossip and controversial headlines. You must have noticed in the media that bad news travels too fast and has always been given more limelight, showcasing it as a big controversy. So, whenever a reputable news channel reports any hack on the crypto exchange, or even just a speculative rumour, it becomes a big thing. And people do seem to believe it so; all this sets a panic situation amongst investors. The first thought of beginners after reading the headline will be “I must escape before it’s too late.” Thus, mass panic will led into a full-fledged market crash. 

Market Manipulation Technique

The crypto market is still fresh and has not yet established its regulations like traditional stock markets. For instance, some traders purposefully spread fake news to drive down the prices of assets. With low prices, they’ll buy more, and the prices will be high again. On the other hand, when prices are rising, people will also dive in to buy even at the top prices because of FOMO. All this creates wild ups and downs in the crypto market.

What can investors do?

As an investor myself, it is tough to sit back and watch. The positive side is that understanding the reasoning behind the market crash will help you make better decisions for the future of your crypto. 

Crypto market crashes are nothing new; it is a new aspect of the market itself. In previous years, the crypto market crashes have been recorded several times. Even so, the market is still soaring high and is stronger than before. Therefore, under these circumstances, you must stay calm without making any rash decisions. 

Frequently Asked Questions (FAQs)

What is the biggest crypto threat?

Unregulated crypto exchanges and threats are the biggest threats to crypto and its investors.

Why do crypto coins go down?

It could be anything: government policies, rumours, big sharks, etc. All these major factors have a direct impact on cryptocurrencies going down. 

Should I exit the crypto market now?

You can exit the crypto market if you are stuck in an emergency and you require cash immediately. 

What is the crypto 1% rule?

This rule suggests that an investor must never risk more than 1% of their invested capital. One must take immediate action whenever necessary to protect their funds at all costs.

Disclaimer

This is just an informative site; we are not assisting you in making any financial decisions. Research well before you conclude a final decision for your funds.