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Important Basics About Crytopcurrency

Coverage in the media: Regardless of the type of media that is used, coverage in the media is one of the primary means by which the price of a given cryptocurrency is manipulated by outside forces as it gives those who are only aware of cryptocurrency in a general sense something to focus all of their energy on.

This artificially generated public interest then leads to an increase in price as investors rush to jump onto the next big thing. The media often perks up when a new cryptocurrency begins showing up on the major cryptocurrency exchanges or if an option that has already previously been mentioned receives a major update to its code.

Additional media worthy events include facts that can be succinctly summed up by sound bites or anything that proves it is a market that is growing in community involvement and overall popularity. Regardless of the context, media coverage is likely to increase the price of the cryptocurrency that receives the coverage.

General opinions: The internet is naturally divided into subgroups that are all intensely devoted to a specific thing. This goes for every type of cryptocurrency, no matter how obscure it is to the wider world and these individuals can be thought of as the cryptocurrency’s vanguard when it comes to convincing the wider world that they are using a viable platform.

These subgroups can be a powerful force when it comes to artificially inflate the price of their chosen cryptocurrency because the more they can get their message out there, the more likely it will be that other people will bite and invest money into it.

Furthermore, these vanguards also provide valuable feedback to developers, work on the code that supports the cryptocurrency themselves, and invest their own money into it, each of which helps drive the price higher.

The clearest example of this type of scenario occurred during the initial Bitcoin bubble in 2014. At this point, Bitcoin had slowly been growing in value for about five years before suddenly hitting a tipping point in its user base.

Once this occurred, the price of something that had previously been worth less than a dollar rapidly increased until the price was greater than $1,000. As a result of this increase, serious investors started taking notice for the first time, and the price has largely been on a positive trajectory ever since.

Automated bots: Just like with any other currency, liquidity is a crucial part of a cryptocurrency’s growth, after all, if there isn’t any available currency to trade, the public interest will drop off, and the price will dip as a result.

Unlike with hard currencies, if a specific cryptocurrency isn’t growing at a rate that its creators appreciate, they can deploy bots to get in on the trading action and artificially inflating the amount of liquidity available, thus ensuring things continue moving in the desired direction.

Liquidity relates to the amount of a given asset that is currently available to trade, and, if it is low, then those looking to trade in a specific cryptocurrency won’t have any means of purchasing it.

To counter this fact, automated bots are employed as a means to sell and buy the targeted cryptocurrency, stimulating growth through what is an essentially simulated transaction, which often causes additional units of the currency to be produced in response, thus improving liquidity overall.

This is particularly prevalent in China, which has far fewer restrictions on cryptocurrency exchanges than the rest of the world. In fact, they are regularly credited with creating a large amount of the liquidity that Bitcoin takes advantage of on a regular basis.

Social media presence: When it comes to traditional currencies, relevant news tends to spread through traditional means such as newspapers and targeted television programs. With cryptocurrency, however, relevant news and policy changes are far more likely to first come to light via social media.

Countless groups across all social media platforms are dedicated to cryptocurrency trading and those who follow it religiously and these followers are typically rabid for their chosen cause.

This level of enthusiasm means that it will only take a small mention of a change to a given cryptocurrency, even if it is unverified, to cause enough movement in that cryptocurrency to affect the market.

This fact has generated a unique phenomenon where those with a financial interest in a particular cryptocurrency can easily spread blatantly false rumors about it as a way to make prices move in the direction they prefer, even past the point where the rumor in question is proven to be without merit.

If this rumor was directly related to a price increase or decrease then it often comes true simply based on public reaction and completely without taking into account what the market would have actually done otherwise.

Pump and dump: This is a type of influencing that has been going on with traditional currencies for generations and has, unsurprisingly, made its way into the cryptocurrency markets where it is frowned upon but not against the law.

The pump and dump works when an individual or group of individuals purchases up as much of a given cryptocurrency as possible, thus limiting the amount available to the public at large, driving up the price as a result of the perceived shortage.

Cryptocurrency exchanges operate via what is known as digital order books, which create lists of all of the cryptocurrency trades made each day. If those books end up being light on sellers and heavy on buyers, the price changes as a result.

After the price has increased in proportion to the amount of scarcity that has been created, those who initiated the pump and dump sell off all of the cryptocurrency that they purchased, achieving a significant windfall in the process. This part of the process then sends the price into the dumpster as the demand will suddenly dramatically decrease when compared to the supply.

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