Effects of economic indicators on cryptocurrency
The growth of cryptocurrencies in recent years has been a significant phenomenon and prices wildly fluctuated between days and weeks. While many people consider cryptocurrencies to be a speculative market, there is a growing evidence indicating that economic indicators that measure their value can have a significant impact on their price movements.
In this article, we will check the commitment between economic indicators and cryptocurrency prices and check some important trends that indicate how investors can use these factors to make reasonable decisions on which cryptocurrencies need to be purchased or sold.
What are economic indicators?
Economics are metrics by which economists appreciate the economic health of the country or the market. This includes indicators such as GDP growth, inflation rate, unemployment rate, interest rates and more. These indicators help political decisions and companies to understand the direction of their economy and make decisions well.
How do economic indicators affect cryptocurrency prices?
Cryptocurrencies are based on a decentralized system in which transactions are recorded by public power called blockchain. This technology allows for peer transactions, without the need for intermediaries, such as banks that can facilitate money laundering and other illegal activities.
However, the underlying economic indicators used to assess the prices of cryptocurrency do not always reflect the value of a certain cryptocurrency. Instead, they influence the overall market moods and the confidence of investors.
Here are some important options for economic indicators affecting cryptocurrency prices:
1
GDP growth rate : A strong GDP growth rate may indicate a stable economy that generates greater demand for cryptocurrencies such as Bitcoin (BTC). Conversely, slow or falling GDP growth can lead to lower prices.
- inflation levels : High inflation levels can reduce consumer purchasing power and reduce demand for cryptocurrencies. On the other hand, low inflation indicates that the economy is slowly growing and could benefit from higher prices of cryptocurrency.
3
Unemployment level
: Low unemployment may indicate a strong labor market, which can lead to greater investor confidence and, consequently higher cryptocurrency prices.
- Interest Rates : Changes in interest rates can affect demand for cryptocurrencies such as Bitcoin (BTC). Higher interest rates may reduce demand, but lower interest rates may increase.
Examples of economic indicators affecting cryptocurrency prices
1
2020 Global Kid-19 Pandemic : The pandemic caused widespread closure and economic contraction, which led to a significant drop in cryptocurrency prices.
2
2018 US Chinese Trade War : The Trade War between the US and China led to tariffs on Chinese imports, which has a negative impact on the world market and cryptocurrency, such as Bitcoin (BTC) and Ethereum (ETH).
3
2019 Global Economic Lankdowndown : The slowdown in the global economy led to a reduction in investors, which led to lower cryptocurrency prices.
Investor feeling and cryptocurrency prices
Investors’ attitudes towards cryptocurrencies are also influenced by economic indicators. For example:
1
Stippimental
: Investors use investors to analyze mood to assess public opinion on cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). A strong positive mood can lead to higher prices, while negative moods can cause lower prices.
- Institutional investment : Institutional investors, such as exposure investment funds and pension funds, have a significant impact on cryptocurrency markets. They often follow the economic indicators that can affect their investment decisions.