Going by the year 2018, if the cryptocurrency industry is to be substituted for another word, the best word will be volatility. It is a known fact that unlike Forex, cryptocurrencies are influenced by various factors which are mostly out of control. For example, the top two major holders of the market capitalization (Bitcoin and Ethereum) experienced volatility rate ranging up to 70% in this year only, locked on a complete bearish market zone. However, apart from the fact that most cryptocurrencies were on a bear market zone for the most quarters of the year, it didn’t change the fact that at some point, there was a rise. But let us not get too sad shall we, let us discuss the year 2017. The year 2017 saw most cryptocurrencies on a super bull market phase. This was evident as the Bitcoin hit an all-time high of $20,000.
Now, before most of these coins went on a roller-coaster ride in price, there were trends that were in place. Most of these trends of course are evident to the eyes as clues, but not everyone pays attention to them. The trends are not necessarily applicable to past events only; they are in fact as applicable as they were in these past years, to many years to come. Without wasting much of your time, shall we discuss these trends?
Originally, when cryptocurrencies came into the limelight, it was greeted with an environment without regulations. Even when it started gaining grounds, although news outlets and major world investors were paying close attention, they still didn’t interfere in the market. However, in 2017, the industry experienced the first step of major regulatory bodies. This was particularly evident in the excessive growth in the ICO funding that many start-ups under the blockchain technology experienced in that year. Also, in Q1 of 2017, Bitcoin took a bullish rise in 3% price within 1 hour when the Japanese government announced that they had plans to legalize the king of cryptocurrency. To drive this point through, you will see the effect that the regulations by the Chinese Government to crackdown cryptocurrencies had on the top players in the industry. Within few hours of the announcement, Bitcoin experienced a 15% drop and Ethereum had a 20% drop.
Pump and Dump
Pump and dump is more of an illegal action, but it remains a trend that contributes immensely to the rise in price of any crypto coin that it is used for. Pump and dump occurs when a whale investor or a group of promoters, promotes a scion that they hold. After promoting this coin, attracting other investors in the process, they sell off their own shares immediately after increase in prices. So if you are new to the market, the pump and dump trend might in fact make the price of a coin seem to be increasing. But it is always a trap. Most people involve in pump and dump scams also make use of bots, and since the crypto market is not as regulated as the stock or forex trade, it is hard to cut down on the perpetrators.
The opinion of the society at large is an important factor that affects the price of a cryptocurrency coin. Opinions are mostly framed by the social media. When probable investors believe that a coin will experience a bull market price, they tend to buy more into the crypto coin. By buying the coin, they indirectly increase the worth of the coin, thereby increasing the price of that coin. This scenario is evident in the super bullish path that bitcoin took. When investors got hold of the opinion that the coin price was about to go on a bullish rise, they began to buy more, attracting new investors into the market, this in turn made the price of bitcoin skyrocket to unbelievable prices. And when the news broke out that the Chinese government were cutting down on the use of bitcoin, the news got most investors into panic mode. They began to withdraw their investments, discouraging v probable investors. This resulted to drastic change in the prices of bitcoin.