Why The Cryptocurrency Markets Crash.

There are thousands of coins, tokens and decentralized applications with their own unique user cases and characteristics. Education is the key to the mass Adoption of cryptocurrency, but the start of the crypto learning curve can be steep for the cheap. Concepts like blockchain mining and staking are hard to understand and even harder to explain in Simple terms, as I'm sure many of you can attest. This can be a problem when you're trying to help your friends, family and anyone else understand where all your money is going and why.

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Currently, my country Uganda is in a lockdown because of covid-19 and most of the people are not working and hence looking for other ways on how to satisfy their basic needs. Probably, it’s one of the reasons why there is mass adoption of newbies on the steem blockchain from my region. So that's why today I made this post to help the newbies who are investing in crypto and anyone else understand why the cryptocurrency markets keep crashing. This isn’t financial advice because that would be lame.

Some people call it a crash, some people call it a dip, some people call it a correction, and others, they call it a bubble. Either way the crypto markets are volatile and there's a lot of reasons why the crypto markets fluctuate so much. It's really good to know these because it helps you psychologically understand the cons and pros of the entire crypto market. So here's the big reasons why the crypto market keeps on crashing.

The first thing that you should know is market confidence and sentiment. Bitcoin is a major player in this because it does in fact control market confidence and sentiment and to some degree it's noticeable. Well, the main reason is, I think about this right just stepping back, logically whenever you have a conversation with someone who's entirely new to crypto and the first thing you're going to have a lengthy discussion on, it's going to be Bitcoin. It doesn't mean it's going to be the first thing that you guys talk about but naturally the conversation is inevitably going to lead to Bitcoin, so conversationally Bitcoin tends to dominate. Well, that also happens in terms of market cap. Financially speaking of course because Bitcoin is a major market leader in terms of market cap, it's literally number one in terms of how much volume. So literally all eyes are on Bitcoin in every type of movement, whether it's long term or short term, the conversation of Bitcoin, it's just unavoidable.

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Well if bitcoin goes down, then it tends to reduce the overall confidence in the crypto market so generally speaking, if there's a Bitcoin sell off, there's probably going to be an altcoin sell off to the entire market holistically. After crashes or mini crashes, Bitcoin is expected to be one of the first coins to rebound, go up to keep rising after the crash, and even if it's not a lot of eyes, again, we're going to be monitoring Bitcoin. Bitcoin controls the market and that's why a lot of people who love Bitcoin keep on saying that Bitcoin is the king. Of course there's people that disagree with that but if you're talking about the current state of the environment right now, bitcoin does control a lot of it.

The second thing is that you should understand trading pairs or cryptocurrency pairs. Basically it's assets that can be traded for each other on an exchange. So if you ever see the option to have Bitcoin or you could buy something else, maybe Litecoin, you could see BTC slash LTC. What that means is that you can buy Litecoin with Bitcoin, there's a lot of other examples but essentially, Bitcoin is one of the most common trading pairs, because in the very beginning, you pretty much needed Bitcoin to buy a whole bunch of other things anyway. If you think about it, the vast majority of trading that actually occurs in the market besides Fiat into crypto, it's going to be Bitcoin with alt coins. So it means a lot of people are using Bitcoin to buy altcoins which opens up a lot of different doors but it also opens up a ton of things that you also have to know as well. So in a sense, Bitcoin is a financial and psychological anchor in the market. Ideally most crypto investors want both of those to go up right and every single option but the next best thing is actually to have Bitcoin be stable while having all of the alt coins go up as well and then obviously if those two different scenarios keep on fluctuating back and forth in a perfect environment which is going to be a really good scenario for investors.

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That's actually one of the potential scenarios which has happened and it's going to keep on happening in the future. If they're not selling their bitcoins, they're probably selling their alt coins and if the markets are really bad then they sometimes convert their crypto into stable coins. It gets even worse than that because sometimes they can cash out completely into their native Fiat.

The next thing you should understand is coupling and decoupling. Generally, what I mean by coupling is when the price of Bitcoin rises, the price of alt coins also rises too, and then on the other hand, if the price of Bitcoin falls, then the price of alt coins are going to fall too while decoupling would be an environment where alt coins values, move independently from Bitcoin. An example of this would be if bitcoin falls well then Alt coins go up, because they're moving independently from each other since there's less reliance on Bitcoin. Most people who've been investing in crypto for a while want decoupling to happen, because not only would this allow some of the alt coins that they're holding to move independently from Bitcoin, but also be an indicator that the crypto industry and the entire market is maturing more.

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Bots are also some of the reasons why the market can insanely crush. There are crypto trading bots out there which do control the majority of stock trading on the US markets right now. If you ever see those random spikes up or down, there's probably a lot of bots just working together, or working against each other. So if it's happening in the regular stock market then it's probably happening in the crypto markets, too. The crypto markets are very different and the one really big thing is that crypto markets are open 24/7 versus the US stock market which generally just operates actively during the weekdays. There's not going to be a lot of stuff happening on the weekends, so crypto markets being open 24/7 around the clock creates a perfect environment for crypto trading bots to prosper. There's a lot of pros and cons to this and some of the people who support this see that bots provide liquidity, provide the activity, the volume, and they basically allow trading to even happen beyond the initial levels while other people don't like it because if you take this on the extreme levels, it's very possible for a series of crypto bots or their movements to artificially inflate prices.

Thanks for following and I hope you understood something from this post.

Keep Steeming,
@brayan256