Cryptocurrency has been on a rollercoaster in recent weeks, and investors have been scratching their heads as to why. With all the hype about digital currency, it’s difficult to see the value in cryptocurrencies like Bitcoin when they’re rapidly crashing these have made lots of people ask Why is cryptocurrency crashing? So let’s take a closer look at what makes this form of currency so volatile.
Why is cryptocurrency crashing? Let’s find out! Cryptocurrency has been on a rollercoaster in recent weeks, and investors have been scratching their heads as to why.
Panic Selling
Many in the mainstream media have claimed that most people are selling off their cryptocurrency holdings in fear of further decline, and they’re probably right. Some investors may be worried about losing money, or they could simply be unsure of how to proceed and are scared to hold onto their coins until everything comes into focus again.
It’s also easy to see why investors would get spooked; with bitcoin currently down over 50 percent from its December high, it’s understandable that people would rather sell now than lose even more later on down the road if things go south as they expect them to do so.
When everyone runs for cover at once, you have little choice but to follow along and brace yourself for impact; it’s essentially human nature.
Bitcoin Cash Forked
This past August, Bitcoin Cash underwent another fork that split it into two separate cryptocurrencies: bitcoin cash ABC and bitcoin cash SV. This event sent shockwaves through cryptocurrency markets and caused major panic among users as well as investors of digital currency.
Investors were increasingly concerned about potential splits due to Bitcoin Cash’s unique consensus algorithm. The blockchain network uses a proof-of-work system for transactions, meaning its nodes have to solve complex mathematical problems to validate blocks on its ledger – something that requires a lot of computer power and electricity to do so.
Cryptocurrency Could Still Suffer
At least, in theory, it’s not hard to see why Bitcoin might be considered attractive as an investment. It’s got similar properties to gold and silver—not only does it have limited quantities (limiting its supply), but it also can’t be easily printed out of thin air by governments or central banks (like fiat currencies).
To keep their value stable over time, governments keep a tight lid on inflation with price controls and other monetary restrictions, while central banks aggressively manage interest rates to try and preserve stability in broader markets.
Most cryptocurrencies don’t have these constraints, meaning their values can change drastically over short periods due to changing investor sentiment—which could make it especially volatile since new investors are getting into cryptocurrencies after seeing big gains in Bitcoin prices lately.
Is the Bitcoin Bubble Bursting?
Cryptocurrency has seen many booms and busts over its short history, and it’s fair to say that we’re currently experiencing one of those swings downward.
The question, though, is why? It would be easy to blame Bitcoin’s dip on China, but there are some other valid theories about what could have caused its sharp drop in value today. Just like with stock markets here in America, you have to know what you’re looking at if you want to get an accurate read on what’s happening—and whether or not it affects your portfolio. (Spoiler alert: it might.)
Could Governments Ban Cryptocurrencies Soon?
While many governments remain wary of cryptocurrencies, it’s hard to imagine that any will completely prohibit them in the future; some have already banned ICOs and exchanges, for example.
And even with legitimate usage coming into view, it’s not hard to envision a time when cryptocurrencies are only traded on black markets—if they’re traded at all.
To be clear, we don’t think that the world is likely anytime soon; indeed, if we were certain that governments would follow through on their threats (and many won’t). Then it would make sense to invest aggressively right now.
How Do You Profit From Cryptocurrency Trading?
So, you’ve decided to give it a shot. Maybe you’re ready to try your hand at creating some passive income, or maybe you just want to earn some money with crypto because it looks like fun, and everyone else seems to be doing it. Good on you!
ALSO READ: How Stock Price Are Determined Each and Every Day
There are so many ways you can make money in crypto trading (and beyond), but today I’m going to focus on how you can profit from short-term trading of volatile coins. Volatility means big swings in value over short periods—like most cryptocurrencies, especially if they are not popular or widespread.
This volatility makes them perfect for trading as you can capitalize on small movements up and down by buying low and selling high. You can even use leverage to increase your profits. For example, if you invest $1,000 into Bitcoin at an exchange rate of $10 per coin, then sell it one hour later when its price has risen 10%, you have made $100 minus fees. Not bad for an hour’s work!
Is This the End of Crypto Investing?
As most people who have bought into crypto know, the price can be quite volatile; in fact, it’s been famously called “digital gold for millennials” for its wild swings. So what causes these wild swings in the prices? There could be any number of reasons why cryptocurrency prices swing so wildly and so quickly, but here are just some of them:
1) New Entrants Into The Market: For example, many people who were new to crypto were introduced by their friends or family members earlier in 2018. Many of these folks (no doubt) also entered with high expectations that later resulted in panic selling when prices fell as quickly as they had risen.
2) Media Coverage: When prices fall, media coverage often follows; unfortunately, most news outlets tend to focus on negative news rather than positive ones.
3) Manipulation: It’s no secret that manipulation plays a role in the crypto markets; whether it’s insider trading or market manipulation from big players like Goldman Sachs. Plenty of people are trying to make money off your losses.
4) Regulation: Lastly, regulation plays an important role in all markets. Especially cryptocurrencies—and we should expect more government oversight as time goes on. What does all of this mean for you?
