Crypto has had a volatile few weeks. Have you ever wondered why that might be? Today, we’ll explore 5 factors that impact crypto prices. We’ll also give you a rundown of the key events that should be inside your trading diary this week. Let’s go!
1. Supply and demand
Like all commodities, most cryptos are governed by the laws of supply and demand. One great example is Bitcoin , only 21 million bitcoin can ever be mined. As a finite commodity, price appreciates due to the scarcity of the resource, i.e. lack of supply.
That finite supply is also impacted by increasing demand from retail and, increasingly, institutional investors.
Crypto assets are not tied to country-specific inflation rates, so they can be a good way of hedging against potential hikes in inflation, which drives interest among institutional and professional traders.
2. The media
News media can both help and harm cryptos as it helps drive retail investor sentiment. The way the media writes about cryptocurrencies can massively impact demand. Good news can certainly increase it, while bad news can cause panic and mass sell-offs, driving the price down.
Celebrity endorsements also loosely fall into this bracket. We’re looking at you, Elon.
3. Global events
Although cryptocurrencies are less impacted by global events and macroeconomic data, they aren’t immune to them. For example, while crypto CFD traders don’t usually trade the US Non-Farm Payroll (NFP) report, the release of the NFP does have an impact on the value of Bitcoin.
Bitcoin (BTC) is often considered a safe haven asset during times of market downturns and has historically shown a negative correlation with the US dollar. Which means that important macroeconomic events, like the NFP, are important for anyone trading BTC/USD CFDs.
4. Rules and regulations
This is a bit of a no brainer. The various different types of rules or requirements introduced by national authorities can have either a positive or negative affect on crypto price.
If the rules are restrictive, the price of a cryptocurrency may drop in value. Conversely, if they provide favourable conditions for investing, they can become a catalyst for strong price rises through increased demand.
This one depends on the asset, but generally speaking, cryptocurrencies don’t just come from nowhere. Crypto miners extract them (via mining) using extremely powerful GPUs. This process becomes more and more difficult and less rewarding over time. If the cost of extracting a digital currency increases, it will have a major impact on the price of the asset.
What’s on the trading agenda this week?
A really busy week lies ahead. Here are all of the top events to take note of.
Monday 26th April
● USD — Durable Goods Orders MoM (MAR)
Tuesday 27th April
● JPY — BoJ Interest Rate Decision; BoJ Quarterly Outlook Report
● USD — CB Consumer Confidence (APR)
Wednesday 28th April
● AUD — Inflation Rate YoY (Q1)
● USD — Fed Interest Rate Decision
Thursday 29th April
● EUR — German Unemployment Change (APR); Unemployment Rate (APR); Inflation Rate YoY Preliminary (APR)
● USD — GDP Growth Rate QoQ Adv (Q1)
Friday 30th April
● CNY — NBS Manufacturing PMI (APR)
● EUR — German GDP Growth Rate YoY Flash (Q1)
● EUR — GDP Growth Rate QoQ Flash (Q1); GDP Growth Rate YoY Flash (Q1)
● USD — Core PCE Price Index YoY (MAR); PCE Price Index YoY (MAR); Michigan Consumer Sentiment Final (APR)
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The Contentworks team