How to range factors according to their weight and which of them are worth considering will remain for you to decide upon.
In making a decision to buy bitcoin and profit from its exchange rate movements one should keep in mind that the pillars of the traditional exchange, supply and demand, don’t play the key part here, though definitely should be taken into consideration. The background information could be more influential. Any bitcoin holder taking skilled and timely action upon artificially created rush and panic about the rate movements can raise or drop the price. Isn’t feeling close to crypto-god refreshing!
However, global and local bitcoin price falls and increases occur all the time and will continue to do so. One should just take note of them because there always will be people who are willing to invest in hopes to get ample profit. Although nobody knows whether they would be successful.
Supply and demand
No doubt this factor is one of the basics. It applies to all types of assets, be they cryptocurrency or securities. The rate increases with the increase in demand when people are willing to buy and do buy. It decreases when the demand falls.
When talking about rates we need to know three terms:
Correction is slow rate movements.
Fall is a 4-5% price decrease.
Crash is a 15%+ decrease that could be instigated by panic, dump (that is when pumpers sell large volumes in one go) or very bad news.
If nothing happens we deal with natural correction. For example moderate increase will conclude in a small drop and vice versa. But this isn’t even the beginning, for real crypto-exchange analysing is much more complex. Although if at some period of time one sees correction at high trading volumes or persistent dumping at all the exchanges that means a crash in the near future (a trader’s gimmick No. 1)
There is no thing like an exchange without bulls. They have been there at the dawn of traditional exchange and naturally have taken the privileged position in the crypto-world.
Pumpers are holders of large volumes of assets, bitcoin in our particular case. They are capable of instant selling orders purchase thus instigating the rapid rise of the rate to its maximum which creates rush and panic among newbies and novices. They begin to buy in agitation and at the peak the pumper makes a dump selling the assets and artificially dropping the rate to its minimum. As an example we could remember a very recent case when someone named Kobayashi has been selling 4000BTC a day artificially lowering the rate. This was not very noticeable because the small trade volumes made the lowering look rather gradual. A more serious player, Roger Ver who sold about 250 thousand bitcoin in November 2017 thus provoking the price fall from $7880 to $5600.
The cryptocurrencies creator, Satoshi Nakamoto (which probably referes to a group of people) holds 1,5 million bitcoin. The bitcoin holder’s worst nightmare is that if even 10% of this gets unloaded the fall similar to the one last November will happen once again and if the sum will be two- or three-fold that would mean an exchange crash. This is an illustration to how one person or a group of people can destroy a whole sector of the economy. For nobody knows how many bitcoin are accumulated in the hands of those pumper and when they decide to take action.
The bitcoin rate is influenced by the rest of the cryptocurrencies, especially those of the top-10. The bitcoin price rises when demand for any cryptocurrency is high and vice versa all the cryptocurrencies’ rates increase when the demand for bitcoin grows. And when you replace increase with lower when the demand falls you get the whole picture. This is what makes a very volatile market where you can instantly get rich or instantly get broke. That’s why you should keep track of at least the top-10 altcoins’ rates by looking them up, say, at coinmarketcap.com. Apps for this tracker undoubtedly useful for a crypto-trader can be found in any appstore.
Now this is really big! Nowadays publications whether honest or not give a large impact to the unstable bitcoin rate. Some time ago Ripple was especially vulnerable to this. Some even said it was the only thing its rate depended on. We could also remember the case when cryptocurrency was declared khalal. The bitcoin rate hopped up by $1000 instantly for this meant 2 million new muslim potential users could enter the market (that they don’t yet understand what it’s all about is another matter).
When we analyse information brought by the media we should take in consideration that we are working with a currency exchange and that we are working with cryptomedia that makes its own impacts. So we have to consider news of two different fields. For example economic news tells us that under the influence of a scandal the BTC rate falls then the fall is followed by purchases of the cheaper bitcoin by other players and that stimulates a price rise. Any massive purchase does.
The example with general news we treat as the one stated above where bitcoin was declared khalal. Bitcoin is heavily dependent on hype, mostly because the news is being multiplying exponentially, 99% media does not bother to verify, especially if news came from a major agency… that did not bother to verify as well and so on. That’s where one has to stop and think instead of starting to feverishly buy bitcoin on the rise. A very different matter is when bitcoin becomes cheaper under the influence of news. Here the technical matter comes into play – we have to spot the minimum and buy the currency in the minimal point when it is just starting to rise, when the less experienced traders get that the news was false. This skill to feel such things comes with experience.
News that are positive for the crypto-community (like that one that was about bitcoin declared khalal) stimulate the price raise, the ones that are negative (like those about another exchange being hacked, one can find a multitude of in the past) lower the rate.
State regulation is a substantial factor. When one of the large countries like China adopts a law prohibiting cryptocurrency, when Russia cannot decide what to classify cryptocurrency as and declares this with a threatening tone all this cannot be ignored by the crypto-community and thus affects the rate. Any large country whose citizens are somehow involved with crypto trade and adopts some or other laws instigates the rate change. As positive we can consider news about laws loosening the reins and giving more freedom to the crypto-society on the premises of this country or other. As negative news of prohibition of this or other product or the sector on the whole. That is why you have to watch closely the news not only in Russian, but in English as well.
We have gathered here the factors that don’t give any impact to the rate. They don’t give it yet or they don’t give it anymore, or probably the impact is so small it could give a moderate correction at the very most.
Everyone knows that the bitcoin supply is controlled. No more than 21 million bitcoin will be produced. The same goes for the majority of cryptocurrencies. The controlled supply is provided for in the code. That makes the price rise. Another minor factor is the loss of approximately 30% bitcoins. Everyone knows about it but it is of no serious consequences.
Public statements of famous or high-ranked sceptics and haters could be of more significance. They have been rarer these days but nevertheless here and there news pops up about another major bank CEO or – heaven forbid – a banana republic chieftain no one knew of before calling bitcoin a bubble and a scam scheme. Yes, these types of news are capable of lowering the market a bit but not enough to write home about. Especially if it was someone on your friends feed in social media. That would be like throwing a pebble into the ocean. For example Warren Buffett’s words do not make any change to the rate anymore. Everyone’s got used to his grumblings.
As the market’s capitalisation is nearing to half of a trillion dollars (probably even having exceeded as of this article) even the strictest sceptics and worst haters are beginning to understand that laws of economics are applicable not only to the conventional market but to the crypto-market as well and there are no substantial differences. And that this is an economy sector one has to take into account.
That is why we gathered and explained these factors for you to understand what does affect the bitcoin rate and what doesn’t.
In this article we gave a list of factors affecting the bitcoin exchange rate and categorized them into those that make a significant change and those that could only cause a slight misalignment.
This knowledge will help your successful trade at the crypto-exchange and also will give you some clues to the understanding of this complicated field.
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