Sep 11

Exploring the Factors Behind Cryptocurrency Value Fluctuations

Cryptocurrency value changes exhibit significant volatility, serving as a foundation upon which trading strategies and market trading methods are established. Let's delve into the primary influences behind these price shifts, which can be classified into two groups: internal elements and external drivers.
Cryptocurrencies lack a "fundamental anchor," thus making them susceptible to drastic value shifts shaped by market sentiments and unpredictable trends.

Internal Elements

The following technical aspects contribute to local market shifts:

• Continuous variations in demand and supply
• Entrance of "whale" investors
• Asset correlations
• Portfolio reallocations
• Changes in market sentiment

The market sentiment, driven by the power struggle between bullish and bearish traders, can cause significant price swings. If bullish traders dominate, prices ascend, but an overbought market can lead to a retracement and subsequently, a downward trend. Without a fundamental anchor to limit price movement, volatility can escalate based on traders' sentiments.

Fiat assets, such as the EUR/USD pair, display similar patterns on a smaller scale. Unlike cryptocurrency, these fluctuations are measured in tiny fractions of a cent rather than hundreds of dollars.

The Entrance of Whales

"Whales" are substantial market players whose assets exceed current market liquidity. They can initiate a wave of transactions, shifting the rate to their advantage before causing a market crash via reverse selling.

Interdependence with Bitcoin

Bitcoin's influence on cryptocurrency values can be direct, as seen in forks and first-generation cryptocurrencies, or indirect. When Bitcoin's value increases, other cryptocurrencies may drop due to diverted attention. As a result, speculators might transfer funds to Bitcoin, leading to an altcoin cash outflow and a Bitcoin value boost.

Asset Movements

High liquidity enables swift asset transfer. Significant currency movements, due to portfolio reallocations, shape quotes and establish trends for average buyers, particularly with altcoins.

External Drivers

External factors and fundamental influences significantly affect Bitcoin and altcoin pricing. These influences may include:

• Regulatory decisions
• Derivative approvals
• Enhanced computing power release
• Political events in specific countries
• Local developments, marketing efforts, and technology upgrades on the blockchain

Regulatory News

Regulatory news often boosts traders' and investors' optimism, with expectations of institutional traders' entry. These institutional entities include hedge funds and major holdings.

The tactics employed by these entities involve dealing with large volumes paired with a locking strategy. This approach elevates liquidity and quotes, resulting in an exponential growth in capitalisation.

Derivatives News

News about the introduction of derivatives such as futures, bonds, and options can enhance cryptocurrency market capitalisation by opening up new markets and speculative methods.

New Mining Equipment Release

The introduction of advanced Asic processors and graphics cards escalates network processing power. This could lead to a brief surge in mined cryptocurrency, causing inflation.

Political and Economic Instability

During political unrest, foreign capital influx into the cryptocurrency market can have unforeseeable effects on capitalisation. The more unstable a country's political and economic situation, the higher the likelihood of cryptocurrencies gaining popularity.

Local Altcoin News

Positive market sentiments can result from technology implementation, development advancements, and roadmap adherence, potentially boosting an altcoin's position. Such news primarily influences smaller cryptocurrencies without affecting larger ones like BTC, ETH, and EOS.


A wide array of elements impacts cryptocurrency prices, including less noticeable factors leading to unforeseen outcomes. Price analysis and forecasting are contingent on market sentiment and fundamental indicators. The main distinction from fiat assets lies in the significance of the weighting factor.