The crypto market is experiencing significant growing pains, combined with the crisis of the bear market. Click to learn more about the causes and when we can expect the market to improve.
WHY IS THE CRYPTO MARKET DOWN, AND WHEN WILL IT GO UP
For some time now, the crypto market has proved to be quite uncertain. The crypto market is experiencing significant growing pains, combined with the crisis of the bear market. There are quite a lot of factors contributing to this, like the following;
Making a profit in the crypto market is less direct than it used to be
Early cryptocurrency investors and entrepreneurs specialised in either day trading or holding cryptocurrency for long periods of time.
But none of the above approaches is sure to make you a fortune with the investment climate today. Bitcoin mining, for example, has become more competitive and difficult. With the market being unpredictable as it is now, day trading has gotten more difficult due to a bear in the market.
People view cryptocurrency as a short-term investment.
Investing in cryptocurrency is growing, but most investors view cryptocurrency as a short-term investment.
Crypto investors likely want quick returns. So, they go short rather than go long. With almost everyone trying to get in and out, there becomes volatility in the market. Unlike other asset classes, most people do not include cryptocurrency in their retirement plans.
Lack of liquidity
Increased liquidity means price stability, cheaper, easier transactions, and more investors' confidence. It would also put a stop to large buys or Bitcoin whales manipulating crypto prices.
Stability and fast transactions would reveal wider cryptocurrency adoption. Meaning people who are not techies or cyberpunks would feel secure converting their money into cryptocurrency, knowing they can convert it back easily without paying high transaction fees.
However, this is not the case today. Despite cryptocurrency adoption being on the rise, exchanges can't provide these functions due to the fact that they don't have enough liquidity.
Widespread market manipulation
One way cryptocurrency investors turn a profit is via "pump and dump" schemes. This is known as cryptocurrency slang to increase a cryptocurrency's value so as to be able to sell it off at its peak.
Pump and dump are quite easy to accomplish, especially when it comes to smaller cap cryptocurrencies. This is a result of the fact that exchanges have varying levels of liquidity, which determines how they price their crypto.
Cryptocurrency is decentralised by definition, which means it is not being controlled by any centralised entity like a government or a bank. Rather demand and supply determine its price. Supply widely differs between exchanges.
For instance, if someone purchases a lot of particular crypto from a smaller exchange, other investors on other exchanges will notice and go ahead to buy the same crypto. This thereby triggers the market-wide price increase.
Neither are larger market cap cryptocurrencies immune to this manipulation.
Security concern
Security continues to be a concern for prospective investors. There is a lot of bad press the cryptocurrency market has received. Some are exit scams, Ponzi schemes, and Initial Coin Offerings (ICOs), which is far from the truth.
People think this is true because stealing funds from exchanges is a lot easier than from banks.
Exchanges might actually be small companies with insufficient security for the control of millions in digital assets. But there are a lot of secure options.
When Will The Crypto Market Go Up
Everything stated above doesn't mean cryptocurrency will not experience another wave of opportunity.
Cryptos viability is connected to the blockchain (the technology that powers it).
With the growth of NFTs, NFT gaming, and the metaverse, the technology behind crypto appears more promising and prevalent than ever.
The cryptocurrency market has originally bounced back before, and it can happen again. But ensure to stick to coins with a high market cap and known reputation to increase your chances of investment success.