7 reasons why Bitcoin prices are falling

Bitcoin is free and traded 365 days a year. Massive trading is a key feature of Bitcoin, and even after more organizations have entered the market, Bitcoin is still more volatile than traditional assets. . The recent plunge once again warned investors that this is still a very risky business. So what is the reason for the fall in Bitcoin prices?

1. Geopolitics

In January 2020, when US President Trump asked about the war with Iran, the price of Bitcoin was hit, like every other market.

2. Macroeconomic environment

When a new virus emerged in March 2020, almost all liquid retailers were suffering financially, which led to the so-called 'Black Thursday'. Over time, the value of Bitcoin dropped by over 50% in a matter of hours, and at one point it fell to the $ 3,600 level.

When the Evergrande incident occurred in September 2021, the financial sector was in dire straits, and the industry believed that the failure of Evergrande could lead to global financial problems, such as a financial crisis traded for Lehman Brothers that year. After the incident was sparked by breaking news, all liquid markets, including Bitcoin, collapsed as investors fled after hearing the news.

3. Risk management

When the United States introduces strict regulations in the Bitcoin and cryptocurrency markets, the market for reaction is usually swift. When these rules occur, short speculators often sell Bitcoin out of fear. While these events increase the short-term volatility of Bitcoin prices, long-term holders know that the content of Bitcoin has not changed and will not be affected by these events.

4. FUD (Fear, Uncertainty, Doubt)

(Figure Description) The Computing Power of Bitcoin in May

Although some large countries have reported that Bitcoin is banned (which can happen several times every six months or so), unsuspecting investors will still be afraid. For example, in May 2021, the value of Bitcoin fell below $ 30,000, down 40%. The counting power of the Bitcoin network is once in half, but, as usual, the Bitcoin network has proven its anti-fragility once after a few months. Although the Bitcoin system is still functioning normally, the transaction was only brought from the United States.

Of course, FUD can spread relationship gossip, and some new players like to scare people and lose money. In general, the rule of thumb for interfering with FUDs is not to blindly believe the information, but to identify yourself.

5. No trust in Bitcoin

When a variety of factors such as the above occur, some market speculators (organizations) who lack confidence in Bitcoin will sell Bitcoin on a large scale, causing the price of Bitcoin to fall in the short term.

6. Too much marketing

When the market leverage is too high, the number of open positions is high, the relationship between long term and short term increases, and investors are optimistic about long term leverage. happen. Although this happens many times, an entrepreneur always wants to do more by increasing his capital, which also indicates that the situation cannot stop when the market overheats.

7. Apply large values ​​to the results

What happens when Bitcoin peaks or hits a profit (e.g. over $ 1,000 billion in market cap, goes public on Coinbase, announces Bitcoin Futures ETFs, or completes $ 100,000 in the future) before) ? Perhaps the first thing to consider is to derive income from an income source. Since these values ​​or heights are the psychological value of many traders, reaching this level can lead to major changes in the market due to large returns. . Of course, there is a FOMO sentiment that can drive prices up, and a negative attitude towards prices is why this market is so popular with so many people.

However, due to the diversity of operations, the global market can always be constrained by large investors before it explodes. This has a big impact on prices in the short term, as Tesla sold some of its Bitcoin operations in the first quarter of 2021 to "test market penetration." It is also the biggest debate over the concept of “slow bull” in the market today. The great involvement of these organizations has always made it impossible for Bitcoin to inflate the bubble in the short term as in the bullish past of the market.

concludes

Why buy an asset - this is a question that many potential entrepreneurs don't really think about. If the point of view of the purchase is not clear enough, it may be possible to rule out the discussion in the various discounts discussed above. Taking Bitcoin as an example, there are many reasons for the short price, but the main features haven't changed.The total price remains unchanged (inflation protection), no penalties (user controlled) and censorship resistant (safe and portable).Investors should always keep their capital (short or long term) in mind. The short-term Stop Loss is understandable. A long process, but if he is afraid and sells, he violates the concept of investing.