Cryptocurrency is virtual money that is in form of values stored in blockchain technology under different online and offline addresses. It has taken the financial world by storm right after the financial crash in 2008. Bitcoin is the mother of all cryptocurrency and in a span of one year its price index rose from $1000 to $20000. The growth was so great that Bitcoin investors earned millions of dollars in profit. This gave rise to many more crypto currencies which include Litecoin(LTC), Ethereum(ETH), Zcash(ZEC) and so on. Even though there are currently over 3000 cryptocurrencies in the financial world right now, Bitcoin still sets the market trend for all the others.
The prices for these currencies are very volatile, while they go up in one week; they fall in the next week. Reasons for falling prices can be almost anything unlike other financial assets like gold which move higher when there is greater risk. Other financial aspects like derivatives also affect the trends in currencies. Derivative trading has impacts on low liquidity markets like cryptocurrencies by creating selling pressures which lower the prices. Another cause of prices going down is the rising costs of mining. This is the process where transactions of various cryptocurrencies are verified and added to a digital ledger. If the price of mining goes up, the number of miners reduces and this affects the value of the currency.
Another reason why the trend of cryptocurrency keeps falling is theft and industry sceptics. Plus Token is a Ponzi scheme in China and Korea that stole over $2 billion dollars worth of cryptocurrencies and sold some of it causing the price to fall. The basic rule of a business is supply and demand; if the supply is low then the demand is high but if the supply is high then the demand is low.
Since the Ponzi scheme flooded the system with the stolen Bitcoin, the currency price dropped to the floor. Industry sceptics affect how the currency is embraced in the market. If there are too many sceptics, then the price will definitely go low. The reason goes together with market manipulation. This is deliberate interference with expected trends resulting in false appearances with respect to the normal trends. It is done by targeting market capitalization, the slippage, liquidity levels, adoption and trading volumes.
Regulatory concerns are also a factor in the downward trend in the cryptocurrency. Different governments are adopting crypto currency in completely different ways and hence low market prices in areas where it is not fully incorporated. There has been some controversy on whether cryptocurrency is eco-friendly due to its large need for power. For mining to take place, expensive equipment and a lot of electricity is needed.
Due to this large consumption of power, some areas where mining is concentrated have started refusing to produce mining materials. Cryptocurrencies are down and a lot of reasons but there is no need to panic. As fast as the value is falling, it may bounce back just as fast.