How would a stock market crash affect the cryptocurrency market?
How the Crypto market crash can help you make money in the long term. Last week, bitcoin and other major cryptocurrencies suffered a steep decline, in what has been described as the "dead of summer". The cause for this sudden decline, many have suggested, is because of speculation in a lack of demand for cryptocurrencies (coupled with a lack of interest from investors, who are allegedly staying out of the market because they are fearful of a potential market crash). A clear sign of this trend was the Bitfinex, the largest Bitcoin exchange in the world, allowing only US dollars on Thursday and Friday last week. As this trend continued, with prices generally on the downward trend, so too did the trading volume – with the trading amount having hit a record low on Saturday.
Why are cryptocurrencies dropping?
If you've owned cryptocurrencies for any length of time then you're likely feeling a little nauseous by now. That's because it's been one week since Bitcoin's value plunged by about $19,000 in just three days. The digital currency has dipped below $6,000 for the first time since December 2017. When it comes to cryptocurrencies, as with any investment strategy, it's not a one-size-fits-all. It's much more complicated than buying an individual stock. There's an interplay between supply and demand — you want more coins out there to lend to businesses so they can use cryptocurrency to purchase goods and services. That's how the number of coins increases. But the market is more liquid than stocks. The price of bitcoin can fluctuate wildly depending on the relative demand for it.
Why are cryptocurrencies dropping?
Cryptocurrency has plunged almost as fast as it had risen, and it has now plummeted by roughly 95% from its peak just over a year ago. This month saw the largest ever one-day price fall for the market when the value of a single Bitcoin fell from $40,420 (£33,380) to $34,920 (£28,838), and it has continued to plummet since.
But the market crash can be interpreted as a 'hard fork' for cryptocurrency, according to Adam White, director of global business development for Coinbase. Hard forks can be either good or bad for cryptocurrency, and a hard fork can be perceived either as creating a hardening of the cryptocurrency codebase that would be highly resistant to further splits or as increasing the chances of blockchain splits leading to the splitting of coins.