What drives crypto prices?
The price of cryptocurrencies usually go up and down in line with news events. As you may have already noticed, whenever there is news that some big financial player signs a partnership with a blockchain company, that crypto’s price goes up. Consequently, when negative news hits the papers, prices go down and today makes no exception.
What’s more, the simple act of buying and selling cryptocurrencies can drive the price up or down. .
What caused today’s drop?
It’s always important to look at the bigger picture when trying to analyze and to predict the price of a cryptocurrency.
The first sign came as early as last week, when the South Korean government announced it will consider regulating and even banning cryptocurrency trading. A few days later, however, the government rectified their statement, adding there are no current plans for an all-out ban.
The same week, a report suggested that the Chinese central government is working to drive out the country’s bitcoin mining community. Believed to be the largest crypto mining community in the world, the group poses many risks because their sheer size and volume can alter the market.
A report emerged yesterday from a major news outlet suggesting that China is actively preparing to block access to international bitcoin exchanges. The news comes a few months after the country banned some exchanges as well as initial coin offerings or ICOs.
How much could you lose?
Looking at each of the major crypto players; bitcoin crashed under the $12,000 mark following a recent high of over $20,000.
Ethereum, on the other hand, dropped 20% to around $1000 per token, while Ripple (XRP) lost a third of its value at the time of writing. Overall, the cryptocurrency market lost an average of $30 billion in about 10 minutes.
What can we expect next?
It’s always hard to say where the prices will swing next, but we strongly believe cryptocurrencies are here to stay. In the past, we’ve compared cryptocurrencies to commodities such as gold or oil, and for good reason. Nik, our CEO, explains:
"Real-world usage for gold is quite limited. But still there is a huge market, huge volumes that are being traded in the market, and these volumes determine the gold price."
The same applies to cryptocurrencies. Today’s move can be explained by a massive sellout driven by fear of a complete breakdown of the cryptocurrency market. The move to sell, chosen by many traders today, does nothing but hurt the market even more, as more and more people add downward pressure to the market.
However, as this massive sellout was based on news events, we believe the prices will correct over the short term.