Reasons for the Declines in Crypto Money Prices

In determining the price of a good or service in the market, the supply and demand for that good or service is the most important factor.  The “Law of Demand” stated in economics is that if the demand for a good increases while the variables affecting the price are fixed, the price of that good will also increase. When the opposite is the case, the decrease in demand causes prices to fall. We can talk about this assumption on the basis of the price movements of crypto coins. Executing a transaction in the cryptocurrency market, we see that the price takes place in the state accepted by the buyer and the seller, thus forming the market price.

Demand increases when investors predict that the price of a crypto asset will increase. This increase in demand brings with it the price of the crypto asset. When the opposite happens, the demand of investors decreases, which leads to a decrease in prices.

Of course, although we have said that the amount of supply and demand has an effect on prices, there are many factors that affect the increase and decrease of prices in the crypto money market. As we mentioned at the beginning of the article, the supply and demand situation, legal developments (regulations) that may affect the decisions of the users, fluctuations in price movements (speculations) and news that closely concerns the crypto money market affect the decisions of the users. In relation to these situations, investors want to sell crypto assets in a negative situation, as a result of which we see prices fall.

If we look at the effects of the current news, Elon Musk has announced that Tesla will no longer sell vehicles with Bitcoin (BTC). This situation brought about a negative impact on the markets. In response, Elon Musk also announced that they are not selling a vehicle with Bitcoin. Although no vehicle sales took place, a price drop was seen in the market as investors influenced their decisions. We see that most users make their transactions through Elon Musk’s tweets. As a result, when Elon Musk writes a negative article for the market, we see that users sell their crypto assets When the opposite happens, users make purchases.

US President Joe Biden is rumored to submit a proposal to Congress to increase the capital gains tax. If Biden raises capital gains taxes, investors will have to pay twice the tax they need to pay today. This situation affects the transactions of investors and has a negative impact on prices.

Investors want to predict the price movements that may occur in the market and perform their transactions more safely. The speculation that arises at this point affects the decisions of investors. For example, predicting that Bitcoin’s prices will fall in the future will reduce the demand of its investors and as a result, a decrease in Bitcoin’s price will be seen. Apart from these speculations, the movements of users who have the resources to make high-volume transactions in the market can increase or decrease the prices of crypto coins. These users, called “whales”, show their effect in a short time. If a “whale” carries out a large amount of sales on the market, a decrease in price will occur.

Regulations affect crypto assets as well as investment instruments. In this context, the regulations to be introduced by the states affect the decisions of investors. A taxation decision taken by the states may indicate a decrease in price movements in the eyes of investors.

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