Almost 10 years had passed since the creation of Bitcoin, the first cryptocurrency. The market for cryptocurrencies is still in its infancy, however. Given its youth, the market is certain to encounter several issues. As a consequence, the market becomes very volatile, with daily price changes of tens or even hundreds of per cent for different cryptocurrencies.
We talk about the four entities that are active in the bitcoin market, their functions, and their interactions with one another. Rudimentary guidance on how to benefit from cryptocurrency would also be included.
The Cryptocurrency Market Currently Has 4 Entities:
2. Financial Institutions
3. Government, and
4. Little Fishes
Whales are people or groups of people that have the power to drastically alter the bitcoin market. This includes well-known figures from the financial community, such as CEOs, or a group of investors with the financial means to invest hundreds of millions of dollars in the cryptocurrency market.
For well-known people like CEOs, their views alone could influence the bitcoin market. Let’s use the remark made by Goldman Sachs CEO Lloyd Blankfein as an example. The price of Bitcoin dropped 20% the same day after Blankfein made it plain that he thought it was mostly used for fraud. The CEO of JPMorgan, Jamie Dimon, mirrored Blankfein’s views on Bitcoin, which led to a 6% decline in price. The aforementioned instances demonstrate that well-known people might possibly have a significant effect on the market.
Even if this is only conjecture, there is a reason why these important people choose to express their ideas. They may not always have opinions that are authentic to who they are. The implication of this is that they may not mean what they say. Their goal in sharing their opinions is to lower the price so that their own business may invest in these cryptocurrencies for less money. Is it really a coincidence that Blankfein made his remarks in the interview just as Bitcoin hit a record high of $11,000? Perhaps? Is it a coincidence that a week after he gave the interview, Goldman Sachs let some of its customers buy Bitcoin? Perhaps? To grasp their stance and to understand why these individuals would make various remarks at certain times, readers must reflect on and analyse these whales.
A tiny group of investors with hundreds of millions of dollars in assets is another kind of whale in the sector. Their capacity to pump and dump makes them such a disturbance to the cryptocurrency market (PaD). On a more localised level, reports of several PaD-focused telegram groups have surfaced.
In contrast to stocks and bonds, where PaD is prohibited, there are presently no laws in the bitcoin market that forbid such activity. These whales have hundreds of millions of cash, and they wouldn’t think twice about using PaD to increase their revenue. These few large investors would coordinate their purchases and sales to raise or lower the price.
Therefore, these whales would have a big influence on the bitcoin market up until laws are passed making PaD illegal.
It’s important to remember that whales do not really have direct power over a cryptocurrency’s price. Instead, they have the power to sway the vast majority of the tiny fish, which is, in part, what drives the bitcoin market. Additionally, the whale’s impact on cryptocurrency prices is often fleeting and does not have a long-term impact on the cryptocurrency market as a whole.
2. Financial Institutions:
Businesses, Banks, and Creators
The Creators exist. They are just the people that invented cryptocurrencies, thus the moniker “Creators,” which is rather simple. There are presently more than 1400 distinct cryptocurrencies, ranging from tiny companies with just a few engineers to large companies with tens or hundreds of employees. Since anybody may make their own crypto relatively easily, there are a lot of distinct kinds of cryptos. Due to this, several worthless cryptos, or “shitcoins,” are issued despite a lack of financing and development.
If we compare it to fiat money, creators are comparable to the nation that prints the currency. Imagine Thomas moving to a deserted island and starting to print the Thomas Dollar as their own money. There would be a number of apparent problems.
The management of the money is not done by a legitimate government or security force. This is comparable to an underfunded, undeveloped cryptocurrency with few developers. I would have a hard time buying any of these little cryptos if you didn’t want to buy the money from a tiny, deserted island. The Thomas Dollar probably lacks the necessary anti-counterfeiting measures, such as 3-D graphics or micro-engraved symbols. Similar to how a less developed cryptocurrency would lack the necessary defences against hackers They could not have the necessary equipment or expertise to maintain the crypto’s security. I want to make it clear that if you want to invest in cryptocurrencies, you should avoid these smaller cryptos.
However, there are certain cryptocurrencies that have a solid development team, a clear vision, and support from a number of financial institutions, making them a great contender for being a safe, future-proof coin.
Banks, the adoption of these blockchain-based technologies by these major financial institutions lends credibility to certain cryptocurrencies.
The price of the cryptocurrency will skyrocket when a major bank agrees to use it. The price often returns to a position that is marginally higher than the starting point, however. The acceptance of a certain cryptocurrency suggests that it is rather stable and has a good chance of being competitive in the future. Having said that, it is advisable to use caution when evaluating banks’ use of cryptocurrencies. One should not follow these institutions blindly since they could just be manipulating the market to their own short-term advantage.
Watch out for businesses that announce they are starting to accept cryptocurrency payments or that are developing their own cryptocurrency. The only factor driving the crypto market now is speculation. As a result, the share price of any firm would significantly increase if it disclosed a connection to cryptocurrencies or any blockchain technology. The announcement’s primary goal will probably be to drive up share prices. Even when the firm may not be financially solid, as, in the case of Kodak, the increase in share prices might still occur. As a result, it is advised that people avoid businesses that publicly declare their affiliation with cryptocurrencies since it is likely a ploy to drive up the value of their stock.
The cryptocurrency market has been significantly influenced by government rules, if not the main one. The cryptocurrency market is still in its early stages, in contrast to stock exchanges, where prices might be more predictable because of the laws that are in place. The majority of investors in the bitcoin industry make their decisions more on conjecture than on reality. Therefore, any negative news, particularly those relating to upcoming government restrictions, would result in a sharp decline in price. As previously indicated, the rapid flood of investors forced governments to quickly put in place interim restrictions to safeguard their populations. Many nations still haven’t implemented any kind of investor protection. China, South Korea, the United States, Singapore, and other governments are rushing to put in place a variety of safeguards for their people.
Consider South Korea, where the government caused chaos in the bitcoin market when the justice minister said that cryptocurrency trading would be completely prohibited. The justice minister’s assertions that there is a total prohibition have been refuted by other parts of the South Korean government. They merely aim to put restrictions in place to keep foreigners and a few investors out of the bitcoin market and to control the sector so that only trustworthy financial institutions can operate. FUD (Fear, Uncertainty, and Doubt) is already prevalent in the market, however, so the harm has already been done. Most cryptocurrencies saw a sharp decline in price as a consequence of this. It is evident from the misunderstanding and the generalised statement about cryptocurrency that governments are hurriedly attempting to enact regulations while coming out as inconsistent and ignorant. Numerous claims have been made that South Korean authorities timed their purchases and sales of cryptocurrencies using insider knowledge. This demonstrates that governments are the largest market manipulators, and the restrictions they enact may have a significant effect on the market for cryptocurrencies.
People often fear government regulations and sell their cryptocurrencies in a hurry when the government imposes restrictions on them. In contrast to the market, I, however, think that for cryptocurrencies to succeed, there must be government controls. Governments would face severe issues, including widespread money laundering and the inability to safeguard their population, if they failed to enforce legislation. With time, these issues would multiply and become worse. The ultimate intervention of the government, which has the power to outright outlaw bitcoin trade, might be terrible for the cryptocurrency sector. The crucial point to remember is that the powerful main international countries always prevail and have the greatest influence. The global governments would be the principal if whales were the worst bullies in school. It won’t be long until the government begins to intervene to control the market. Instead of freaking out, maybe one should welcome this shift since it will create a more reliable and sustainable market for investors.
4. Small Fishes:
Small fish are the tiny participants in this multi-billion dollar cryptocurrency business, as the name suggests. Therefore, who is a “little fish”? Simply explained, a tiny fish is any bitcoin investor who does not individually have a significant influence on the cryptocurrency market. This may be anything from a basic student investing $500 in Bitcoin to billionaires investing $1 million. A million is scarcely a significant number in such a huge market.
A Small fish has very little effect on the bitcoin market on their own. But if all the little fish join together, it might really make or break a cryptocurrency, not to mention the market. They are a force to be reckoned with since little fish make up the bulk of the bitcoin market.
We must first comprehend what cryptocurrency is in order to grasp this industry. The psychology of all the investors in the market is literally physicalized in the present market. What does that signify, then? This implies that nothing else, and only the worth of the currency as perceived by all investors, affects the pricing of any given cryptocurrency.
The price of a cryptocurrency is what the majority of the market thinks it is, according to the cryptocurrency market. Perhaps the term “value is in the eye of the investor” would be a better alternative to “beauty is in the eye of the beholder.” More importantly, cryptocurrencies have no intrinsic value other than what most investors believe they are worth. Therefore, the price of the cryptocurrency is determined by the combined wisdom of all the tiny fish.
Who Is Actually In Charge Of The Market?:
Simply said, each of the four aforementioned companies has a unique contribution to provide to the bitcoin market. We must first comprehend the interactions between the four entities in order to comprehend the market. Because they make up the bulk of the bitcoin market, the attention would be concentrated on the tiny fish. Whales are there to make money, thus they’ll attempt to drive up or drive down the price. The designers want to boost public awareness of their cryptocurrency in the hopes that little fish would buy it and drive up the price. Companies publicise their affiliation with cryptocurrencies in an effort to boost the value of their shares by preying on impatient investors (small fishes). The purpose of the government is to attempt to shield the little fish from such a tumultuous market. As previously said, every move is intended to have an impact on the little fish.
How To Make Money On Today’s Cryptocurrency Market:
As was previously noted, the present cryptocurrency industry is still in its early stages, therefore price volatility is unavoidable. If you know your adversary and yourself, Sun Tzu said, “you need not worry about the outcome of a hundred wars.” The best thing one can do in such a turbulent market is to be aware of some of the market factors at work and respond logically to each circumstance. When news concerning cryptocurrency is released, the price often changes significantly.
On the other side, the whole cryptocurrency market surged into overdrive as reports of impending crypto-regulations began to appear. Most of the cryptocurrencies’ prices fell as a result of the selling frenzy. However, after a week or two, the market begins to stabilise. The idea I’m attempting to convey is that while the price might vary somewhat day to day, it would often stabilise over time at a number that was either little higher or lower than its initial value.
This raises the important issue of how to profit from cryptocurrency. There is no easy solution. However, by selecting businesses with a strong vision, a strong development team, strong financial supporters, and a future-proof product, it may be possible to predict how cryptocurrency will perform in the future. For instance, Bitcoin may be the “King” of cryptocurrencies, but I think its reign may isn’t coming to an end shortly.
This is due to the fact that Bitcoin’s transaction speeds are just too long in comparison to other cryptocurrencies, making it impractical for the average person to utilise to purchase a bagel in the morning. The most important thing to keep in mind is that purchasing crypto that is future-proof is the greatest method to protect oneself from the shifting price of cryptocurrencies.
The little fish is the focus of every decision made by the government, institutions, and whales. Greater knowledge of the Cryptocurrency market would result from knowing the activities and effects of each entity.
Government restrictions should not be feared but welcomed instead since they will make the cryptocurrency market more secure and profitable in the long run.
The greatest method to invest in cryptocurrencies, in my view, is to find products with a solid development team that are future-proof. Holding out and waiting would provide a safer and greater chance of the price rising.