Due to cryptocurrencies’ spectacular rise and occasionally abrupt declines, it has been a masterpiece in the financial world. Particularly during unfavorable swings, enthusiasts and investors frequently speculate about the future of cryptocurrencies. Unfavorable market conditions and challenges faced by the crypto market frequently, the question “How low will crypto go?” comes up.
Cryptocurrencies are a new asset class that has generated a lot of interest from institutional investors, venture capitalists, etc. Knowing how low will crypto go will be leading us to make emphases on a different important topic that affects the prices of cryptocurrencies, such as; factors leading to market volatility, historical market trends analysis, roles of institutional investors and traders, and finally the future of the crypto market potential scenarios.
Factors Leading To Market Volatilities
In the cryptocurrency industry, regulatory news be it negative or positive, and technological development cause market volatilities, and experiences price fluctuations that the traditional financial market doesn’t face. Below are some examples of these factors.
- Economy Factor: Investors frequently to cryptocurrency as a hedge against economic challenges, inflation anxieties, or depreciation of currencies in the traditional market.
- Technological Development: The introduction of innovative projects with real-life applications and advancement in blockchain technology stimulate the market and increase cryptocurrency adoption. However, poor technological advancements lead to a decrease in cryptocurrency prices.
- Market Sentiment: The prices of cryptocurrencies are highly affected by positive or negative news about the market and this can be favorable policies, news concerning public adoptions, institutional partnerships, etc. This draws investors to the crypto industry and also brings more hope to crypto enthusiasts. If it is positive news, it attracts more crypto investors and increases their hopes, but if it is negative news, it has bad effects on the prices of cryptos.
- Impacts Of Policies: The optimism and confidence of investors can be reduced or increased based on the impact of policies concerning the market, whether it is a negative or positive policy. If it is a negative policy, it created fear within investors which will in turn cause dumping of the market.
Historical Market Trend Analysis
The crypto market has previously experience number of major corrections, also known as “Crypto Winters”. Steep price falls and prolonged bear markets are features of these seasons. The crypto bear market around 2013-2014. There was a bull run around 2017 which was followed by a prolonged crypto winter in 2018-2019. The bear market of 2013-2014 and 2018-2019 are prominent examples of the bear markets. Institutional investors and traders have begun to pay attention to the market as a result of its exceptional strength in recovering from previous market downtrends and indicating resilience.
The Roles Of Institutional Investors And Traders
In the recent time, there has been some increase in the engagement of institutional traders and investors in the crypto market. Market stability and volatility are sometimes determined by the interest of these institutions. Sometimes, institutional adoption may result in more cryptocurrency credibility and liquidity. Substantial price fluctuation may arise from abrupt, institutional investments in the crypto market, withdrawal, etc.
Future Of The Cryptocurrency Market Potential Scenarios
The intricate and dynamic structure of the crypto market makes it difficult to predict the future of cryptocurrency. On the basis of past market behavior, technological development, and regulatory environment, certain probable scenarios can be taken into consideration. Below are the highlighted scenarios.
- Bullish Scenarios: Based on analysis, some crypto enthusiasts believed that cryptocurrency will continue moving in an uptrend direction which can be a result of a series of developments in the crypto ecosystem. Some of these developments are; technological development, institutional adoption, and interest. Cryptocurrency will attain a new all-time high due to limited supply, good use cases, and mass adoption.
- Bearish Prediction: Cryptocurrency may experience some market surge due to unfavorable policies placed on cryptocurrencies, high volatilities, low trading volume, etc, all this could result in a market downtrend which can cause “crypto winters”.
The crypto market is influenced by various factors, so answering the question “How low will crypto go?” will be a bit complex due to these factors affecting the price of cryptocurrency. The future price of cryptocurrency is unpredictable but having the knowledge of market potential scenarios, the roles of institutional investors and traders in the market, and historical market analysis can give you a clear view of what the future of cryptocurrencies will look like. However, despite understanding these factors, you cannot rightly predict the future price in most cases.
Investors and traders are highly advised to trade the market with caution, considering the risks involves and always diversify their investments where necessary.