The cryptocurrency market has already suffered one major crash this year, and it is well known that it is a particularly volatile market. But, what a lot of people don’t know is what can cause major crashes. Here are just a few things that can affect the prices of cryptocurrencies.
This is a fairly obvious one, but regulation plays a massive part in the price of virtual currencies. Take China for example. They banned cryptocurrencies for a short time in the summer of last year, and all that happened was that people and companies moved elsewhere, which actually caused the market to rally. But, if this was Europe or the US that introduced these bans, the chances are they would have a much bigger effect.
Before 2014, there was just one exchange that was accountable for over 70 percent of all trading volume, Mt Gox. At one point, it suspended trading, which in turn initiated an 80 percent crash of the entire crypto market.
Although some worry that this could happen again today, it is unlikely, as trading is far better distributed now. There is not one exchange that owns more than ten percent of the entire trading volume.
That said, there are a number of exchanges that play more important roles than others.
There are some exchanges where you can use a credit card to purchase cryptocurrencies. But this works on the assumption that the market will continue to grow, so it will be bad news if there are any extended periods of sideways movements.
Tethered gets issued whenever $1 is deposited in return. The current tether price is around $1.6billion, which means that in theory the same amount has actually gone into that cryptocurrency.
Yet, according to some reports, there is not actually $1.6billion backing up the token. Many exchanges and cryptocurrencies are connected to tether, finding that the value is untrue would quickly send the market into a huge decline.