Introduction
As we all know, Cryptocurrency is currently breaking headlines all over Forbes, MarketWatch, Bloomberg, Reuters and many others as this topic garners the most views which is good for publicity. Whether one is an early adopter or just a bystander, the buzz will continue to happen. Even Google Finance silently adds a dedicated ‘crypto’ tab featuring Bitcoin, Ether and Litecoin.
Looking at the data above from Google Trends indicating the word bitcoin to see the interest worldwide in the past 12 months.
So why is it getting all the media attention? To my view, it is actually the potential of blockchain technology that will have a big impact to the various sectors. Also, there were many millionaires that popped out overnight which draw a huge interest to those paying attention to the media across the globe. Who doesn't want to be a overnight millionaire and not have a single worry about our financial obligations?
If I can summary Cryptocurrency in a sentence, this would be how I will put it.
‘Decentralized Finance’
Looking back to our history, time and time again it has shown that we, homo sapiens could never change the most important thing over the centuries; POWER. I came across a really interesting documentary showing how the evolution of our fiat system since the beginning of time. The other thing that sped up the adoption of the cryptocurrency is also the Covid-19 pandemic, the Stimulus package, unemployment, and the lost of faith in our fiat system.
Let’s get down to the top 5 reasons that affects Cryptocurrency:
1. Regulation
In the cryptocurrency space, there isn’t any firm regulation currently being enforced worldwide. Whenever the media covers some news regarding regulation about cryptocurrency, there are always dips in the price of bitcoin, Ethereum and the rest of the cryptocurrencies. There are valid points being brought by the regulatory bodies whereby the Darknet, Terrorists, Money Launderers and criminals are using Cryptocurrency for the exchange of Drugs, Weapons and Prostitutions since the transaction can be performed anonymously since it is decentralized and it’s not traceable. In my view, I do not see it any different from where the current Fiat system and high valued commodities such as diamonds, coins, gold bars are being used to facilitate these sort of transactions as well.
Will it be regulated globally? I don’t know, but only time will tell, maybe the regulators currently do not see it as a huge threat, and are practically snoozing it for now. However there are countries where the trading of cryptocurrency has made a huge impact to their countries and have placed a strict ban on Crypto such as Nigeria and India.
2. Interest Rates
The world is trying to reduce interest rates globally to stimulate spending in their respective economy across the globe. However, even with the ‘invisible hands’ the economy is not recovering at a pace that they would like.
So how does interest rates affect you and the Cryptomarkets?
There is an inverse(opposite) relationship between Cryptocurrency and Interest Rates.
As Interest Rates goes down,
The financial markets, commodities, and crypto market goes up.
Reason why is that, the public are assumed to get more loans as it is cheaper to stimulate the economy. However that is not the case for the vast majority.
Instead, more and more people are putting their money into not just stock markets but also crypto markets to grow their funds instead of the economy.
Not only is Crypto a good hedge against fiat, but see what is it worth today if you would have invested $100 in 2009.
3. Whales / Institutional Support
To the ordinary retail investor, if more corporations are purchasing and announcing that they have crypto in their portfolio, it goes to show acceptance of crypto as an asset class. Institutions like MicroStrategy, Tesla, Square and many others are announcing their adoption of bitcoin into their balance sheet which are positive news to Crypto as a whole. However, there is a point to take note that, should they choose to liquidate sometime in the future, whose to say that they are not in it for the profits as well? I’m pretty sure there are individuals out there that are paying close attention to the big whales that have bitcoin in their portfolio one way or another.
4. Investment Bankers and Miners
For those who have not watched The Big Short (2015) or Wolf of Wallstreet (2013), I highly suggest that you pay attention to these 2 movies as they are the foundation of the financial markets and somewhat also contributed to the volatility of bitcoin prices as well as the Gamestop incident.
In the recent weeks that passed, those who were paying attention noticed that Bitcoin price tumbled from a high of $58,534 to a low of $43,021 which is a 26.5% drop!.
What caused it? There are some evidence that indicates that a vast majority that caused the drop was due to a mining pool F2Pool.
Coupled with a short Leverage position from the big fund managers, it’s very likely that caused a ‘big short’ incident which cause the retail investors to panic.
Why would you say they would do this? 1 word. Money.
Bitcoin miners are also very important to the Crypto ecosystem as a whole. If all the miners were to stop mining one day simultaneously, the entire Crypto ecosystem would collapse as it is highly dependent on a network of miners for the smooth operations of blockchain technology to function properly.
5. You
As the days passes, the number of individual investors are growing steadily due to a variety of reason from FOMO, diversification, or just making more money. Regardless of the reason, ensure that the necessary research is being done properly as there are still lot’s of ‘scam’ coins out there any Ponzi schemes out there.
My suggestion, always do the research first, check out as there are plenty of resources from Youtube, Reddit, Twitter, Telegram pages and ask the community as the community around Crypto is very positive.
If you sensed something is off, back the hell out!!
“Money doesn’t grow overnight but overtime.”
“Time in the market beats Timing the market.”
Hopefully I managed to provide you with some value and can gain your support as I’m building and sharing knowledge mostly on Twitter currently.
Kimican90
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Disclaimer: This is not financial advice. Please do your own research. As Crypto is a highly risky and volatile instrument of investment the risk and reward is different for everyone. Invest at your own risk and only what you CAN AFFORD to lose.
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