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Cryptocurrency prices yo-yo: what’s going on?

Cryptocurrency prices yo-yo: what’s going on?
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Cryptocurrency prices continue to excite and disappoint as the market bounces up and down. Watching the movements is enough to make you dizzy. But what’s going on and why has there been another correction in the market?

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Why do cryptocurrency prices change so quickly?

Just like normal financial markets, cryptocurrency markets go through bullish and bearish periods.

However, because crypto markets are open 24/7 and there are minimal controls or regulations, everything happens in hyperdrive. Instead of prices changing gradually, they can swing wildly in minutes.

This is why you might see values rise quickly. Then, a few hours later, a crash or correction can wipe billions off the market.

Why have cryptocurrency prices dropped?

I’m sure that if you asked ten different people this question, you’d get ten different answers!

According to Simon Peters, cryptoasset analyst at multi-asset investment platform eToro, there are a number of reasons for the latest cryptocurrency correction: “The sell-off is being driven by a number of factors; valuations were at or near all-time highs earlier this month, so there will naturally be some profit-taking, while we are also seeing a general sell-off among risk assets – such as technology stocks – as economies start to unlock post the pandemic and investors fret over potential rate rises and higher inflation.

“However, for many cryptoassets such as Bitcoin and Ethereum, the long-term story has not changed. This emerging asset class continues to revolutionise many aspects of financial services, and while nothing goes up in a straight line, the long-term fundamentals for cryptoassets remain as solid as ever.”

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What about the Bitcoin price?

In the past, the whole market would move based on what was happening with Bitcoin. Recently, there has been some decoupling of prices. This just means that cryptocurrency prices are moving independently of each other rather than being tied to the whims of Bitcoin.

Bitcoin’s price has seen a significant dip in the last few days. Many are attributing this drop to a surprise announcement from Elon Musk and Tesla.

We’ve all witnessed Musk’s ability to influence stock prices and interest in things like Dogecoin, moving markets with just a tweet.

His latest was to notify the world that Tesla would no longer accept Bitcoin payments for vehicles due to energy consumption concerns. This was a hammer blow to crypto enthusiasts around the globe.

What’s next for cryptocurrency prices?

If only anyone had the answers. It would be the modern-day equivalent of getting your hands on the Sports Almanac from Back to the Future!

No one knows for sure what is going to happen with prices. According to Simon Peters at eToro, we’re going to see a continuation of trends and much of the same yo-yoing: “Indeed, we would expect to see buyers return to Bitcoin, Ethereum and peers in the next few weeks to take advantage of lower prices.

“Importantly, we continue to see higher lows, as well as higher highs, for cryptoassets as more investors enter this asset class, and we do not expect that trend to change.”

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