The Rise And Drop Of Cryptocurrencies

·4-min read

MyBTCZone, with massive adoption of Bitcoin and other 1,500 cryptocurrencies, the crypto market is definitely experiencing a boom even in the face of the global pandemic. Due to the boom and the ever-increasing demand for cryptocurrencies, so many crypto startups have begun to emerge across the world.

Also Read | Twitter CEO Jack Dorsey’s First Tweet Fetches $2.4 Million

The crypto market capitalization has grown from what it used to be and currently hovers around $1 trillion. Bitcoin, which has experienced a massive bull run this 2021, is responsible for the surge in the crypto market capitalization. As of early January, the price of both Bitcoin and Ether were around $40,000 and $1,333 respectively; however, both coins have since crossed to around $60,000 and $1,800 as of the time of writing this post. This increase happened in less than 90 days.

Similarly, there are other cryptocurrencies that have surged in time past and are now dipping. For instance, as of September 2020, the price of Ripple (XRP) dropped to 0.023 from $0.2977. It recovered slightly to reach $0.25. This is a clear departure from its February 14 price of $0.33.

Also Read | Digital Yuan and Its Effect on the Global Economy

The rise and fall of cryptocurrencies have left so many investors and crypto enthusiasts wondering what could be responsible for cryptocurrency surge and dip. In this article, we will explore some cogent reasons responsible for the rise and fall of cryptocurrency prices.

1 Why Crypto Prices Rise?

Institutional Adoption

Institutional adoption has been identified as the number one reason why the price of Bitcoin and other cryptocurrencies rise. So many investors consider Bitcoin as a safe-haven against inflation and market volatility. The present day economic and societal climate encourages people to stay hedged against swings and hold less cash for transactions.

So many companies have started converting their cash payments into digital currencies. For instance, Square recently bought Bitcoins to the tune of $50 million. Also, Microstrategy converted more than $425 million in cash into Bitcoin. The company believes that Bitcoin presents a better store value than the traditional banks.

There are so many other companies out there that have joined this bandwagon; therefore, giving cryptocurrencies more merit as a store value and as a currency.

2 Paypal & Cryptocurrencies

PayPal, one of the biggest payment companies announced in October 2020 that it would add a feature where crypto users would be able to buy and sell cryptocurrencies on their platform. The launch started with 4 major digital assets - Ethereum, Bitcoin Cash, Bitcoin, and Litecoin. The company also announced plans to support cryptocurrency transactions.

Before now, PayPal has been one of the heavy critics of Bitcoins. What made them jump on the bandwagon still leaves much to be desired. Aside from PayPal's support, the demand for cryptocurrencies across the world has also contributed to the rise in the price of cryptos.

3 Easy Accessibility To Public

Aside from being used as a store value, cryptocurrencies also serve as a mode of exchange. Even though people now start using it as a legit payment method, cryptos have been around over the past decade. Many crypto enthusiasts want to convert their cash into cryptos because it is a hedge against inflation.

For instance, after the RBI lifted its ban on cryptocurrencies in India, many platforms have sprung up across the country to make crypto investing more accessible to Indians. A typical example is CoinSwitch Kuber. This brand acquired more than 2 millions users within the space of 6 months after launch. The ease of accessing cryptocurrencies, no doubt, has also contributed to its price surge.

Why Do We Get Extreme Price Drops in Crypto?

Two principal suspects have been penned by industry experts to be responsible for the fall of cryptocurrencies. The first is cryptocurrency whales. These are big investors who deposited large Bitcoins to benefit from BTC's record highs.

The second suspect is regulator uncertainty. Rumors have it that the US Treasury Department plans to monitor the wallets of crypto users. This kind of news can send the price of Bitcoin and other big cryptocurrencies down the trend, because there would be massive sell-offs.