The 10 Forces that Influence Bitcoin and Other Cryptocurrencies

Bitcoin and other cryptocurrencies are subject to a range of influential factors that can affect their price, availability, and saleability. Here’s 10 of them.

The world’s first cryptocurrency, Bitcoin, is reaching its early stages of maturity, mainstream acceptance, and a value that other cryptocurrencies are all aiming to reach. Even as we approach a decade of Bitcoin, this popular cryptocurrency is still heavily influenced by the same factors it was back in its infancy.

One doesn’t need to be great with numbers to make a fortune with cryptocurrency. If you’re able to observe patterns, human behavior, and anticipate change, you’ve got a powerful crypto-trading mindset.

This article will explore factors that no cryptocurrency is immune to. These outside forces can create devastating lows and far-reaching buying opportunities.

1. Political Unrest

As of late, there have been many examples where political unrest created a bullish cryptocurrency market.

This is due to a large population of a given country losing faith in their national currency, trading in FIAT — in many cases, their entire savings — into a cryptocurrency. Because Bitcoin is considered “digital gold”, it’s often the crypto of choice.

The Bolivarian Republic of Venezuela is on the brink of civil war, and the recent “illegal” referendum in Catalonia, Spain are prime examples of countries whose population has lost faith in their federal governments and their national currency.

And it likely won’t stop there. Economic instability is a global problem and people suffering under its weight believe in Bitcoin as a reprieve.

2. Mainstream Adoption

I’m tying this one to demand and supply; the greater the adoption, the lower the supply, the higher the price. And this is compounded by the nature a deflationary currency.

3. Government Legislation

Following this theme a little further along, government intervention takes many forms. In the US, the SEC has been moving forward with regulations on cryptocurrency initial coin offerings (ICOs). In the case of the SEC; their move to legitimise cryptocurrency to the general public looks like a good thing.

However, one limb of government may have a very different stance on cryptocurrency than another. This is what we’re seeing with the IRS and their attempt to dismantle many of the advantages this emerging financial technology offers while trying to expose those who use it to the light of day.

Elsewhere, it almost feels like governments are toying with regulations in an attempt to cause fear, uncertainty, and doubt (FUD) — only to lower the value of various cryptocurrencies for personal gain.

Russia and China (and their respective media outlets) have both sent mixed messages on cryptocurrency acceptance this year.

Russia, for instance, has changed their stance on cryptocurrency numerous times. When Putin met with Vitalik, the world thought Russia would embrace cryptocurrencies and respective ICOs. Instead, the Russian media reported that he was moving to ban them. Yet 5 days later, an announcement on the CryptoRuble was made.

China has clearly embraced Bitcoin and other cryptocurrencies through mining and have become a global leader.

And yet the Chinese government is moving to ban exchanges and legislate cryptocurrency in China to death. Or is it? Once again, the media says this may be temporary – can anyone in China make up their mind on crypto? This is just one example where FUD in the China cryptocurrency market can potentially affect a coin’s price.

But it isn’t all bad news. For instance, stricter government legislation in China is creating a political divide and giving other countries an economic advantage. Hong Kong appears to be very open to Bitcoin, and with that declaration it will also likely attract the kind of talent and financial benefits that come with it.

Put simply; it’s getting to the point where Bitcoin and other cryptocurrencies are influencing where people live, what passport they carry, and where their taxes go. Ask not what your government can do to you, but what you can do to your government.

4. Financial Institutions and Central Banks

This one is obvious; I almost didn’t need to include it. James Damore, CEO of JP Morgan, is ridiculing those “stupid” enough to get into cryptocurrency and threatening to fire any employee trading it; yet his company is buying it up, sits at the table with the Ethereum Enterprise Alliance, and his own daughter is making money with it.

In a nutshell, this describes the actions of the entire financial industry. They are creating fear, uncertainty, and doubt –then swooping in and buying it up at a lower price, and in some cases, making their own blockchain currency.

5. Scaling Debate and Resolution

Every hard fork, talk of Segwit, and technological change to any blockchain creates a tidal wave of FUD which always plays a role in Bitcoin’s value. Rookies always pull out and lose money; seasoned cryptocurrency holders always buy more. It is what it is.

6. Big Businesses and the Wealthy

As a result of the regulatory boogeyman staying in the closet (for now!), both big businesses and the wealthy are enjoying a little more flexibility than they have with traditional stock markets.

And they’re having fun with it, any way you cut it — whether it’s using influence to manipulate the market, or quietly buying a heap of cryptocurrency and dropping it all at once to cast doubt on a sensitive market.

It’s possible for wealthy players to destroy a coin altogether: buying into a new coin with the full intention of pumping it and selling it off for FIAT for good.

7. Early Adopters

In the case of Bitcoin Cash, a product of the recent Bitcoin hard fork, it appears that there’s one particular early adopter that has some BCH holders concerned.

There’s an unknown BCH miner who currently holds 97% of the cryptocurrency’s hash power. It may not be cause for panic, though. It’s more likely this player is in it for the advantages of getting in early.

Any miner with over half the hashpower of a cryptocurrency has the ability to manipulate the currency.

8. Mainstream Press and Internet Influencers

Good or bad press on a mainstream media outlet can affect the value of any cryptocurrency. It provides opportunities for those eager to move in on a low and sell at a high, but weaker coins can sometimes never recover. And in Monero’s case, some flourish.

In addition to mainstream press, more savvy cryptocurrency holders will follow key cryptocurrency internet influencers for trading advice. With the wave of a hand or a 144 characters, internet influencers can pump or sink a coin in a heartbeat.

9. Impressive ICOs

Whenever there’s a new ICO, most crypto holders will perk up and take a peek. And if a particular crypto coin seems really attractive, cryptocurrency holders will jump ship from their current sweetheart coins and dump everything into a new one, with hopes of quick gains.

This behavior can cause serious ripples in the cryptocoin space.

10. Other Backers, Perceived Value, and Scandals

Disney put out a coin, and that’s going to be attractive for a whole lot of people. Why? Because it’s Disney. I don’t care if their cryptocoin was made of fairy dust, I’m in early.

In the case of Disney, it’s all about who’s backing it and its perceived value.

Dogecoin was dogged by sexual misconduct allegations. Uh-oh. Just one of many cases where sexism or misconduct (or both) has killed a promising startup.

In Conclusion

These factors that influence cryptocurrency are only a starting point.

Trading anything with such wide adoption is subject to a mob mentality. People engaging with cryptocurrency come from more diverse walks of life than your average stock trader, which makes crypto more of a Wild West than other markets.

Love it or hate it, I think it creates really great opportunities. Sometimes, a decision to buy into a coin has nothing to do with the technology or how likely it is to succeed; it’s all about what the market’s doing that makes it equitable.

 

What do you think I left out? Let everyone know in the comments!

 

1 Comment

  • Tom
    Posted May 11, 2018 10:11 am 0Likes

    Solid piece.

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