Why Do Cryptocurrencies Drop? 3 Reasons Crypto is Crashing 

Bitcoin on a phone showing a crashing market

Cryptocurrencies are dropping in value for a variety of reasons. Some people believe that the bubble is bursting, and others think that regulations will be put into place soon that will cripple the industry. Others still think that the market is simply overvalued, and a correction is necessary for it to stabilize.

But why do they drop in value in the first place? And why is crypto crashing today? There are many different reasons why cryptos might lose value, but some of the most common reasons include hacks, government regulation, and bad press. Cryptocurrencies are volatile and can drop in value for a variety of reasons so let’s discuss some of the most common explanations.

Cryptocurrency hacks

So, why is crypto tanking and what role do hackers play in its volatility? Unfortunately, cryptocurrency hacks are on the rise, as digital currencies become more popular.

In 2020 for example it was estimated that $3.2 billion worth of cryptocurrency was stolen. But what is causing this increase in cryptocurrency hacks? And what can be done to prevent them?

Here are a few possible explanations:

  • Cryptocurrencies are becoming more popular, and thus they are a bigger target for hackers.
  • Cryptocurrency exchanges are not as secure as they should be, and they are vulnerable to attacks.
  • Hackers are getting smarter and more sophisticated, and they are finding new ways to steal cryptocurrency.

How can this be resolved? One way is to store your cryptocurrency in a decentralized wallet instead of an exchange. Decentralized wallets give you more control over your cryptocurrency, but it’s up to you to secure the wallet against hackers with strong passwords and two-factor authentication.

Cryptocurrencies are decentralized, meaning that they’re not controlled by any central authority. This is one of the main reasons why cryptocurrencies are so popular – they’re not subject to the whims of central banks that are responsible for controlling the supply of money and changing interest rates.

How to secure your cryptocurrency

While many people view cryptocurrencies as being inherently insecure, there are several ways to make your cryptocurrency transactions more secure.

One of the most important things to remember when it comes to cryptocurrency security is to use a strong password. Make sure your password is difficult to guess, and don’t use the same password for multiple accounts. You should also enable two-factor authentication whenever possible, and consider getting a VPN like ipvanish to add another layer of security to your internet network and shield your IP address from hackers.

Another important thing to keep in mind when it comes to cryptocurrency security is to be careful about where you store your coins. It’s best not to store them on exchanges, as these can easily be hacked and then the coins will be lost forever. Instead, you should use a wallet that can securely store your coins and lets you control private keys.

Government regulation

Cryptocurrencies are often volatile, and one of the reasons for this is government regulation. When a government announces that it will be regulating cryptocurrencies, investors react by selling their holdings. This causes the price of cryptocurrencies to drop as people sell to avoid being subject to government regulations.

Another reason why cryptos can drop is because of negative news. For example, if any of the largest cryptocurrency exchanges are hacked, investors will sell their holdings as they fear that the security of the cryptocurrency ecosystem is compromised. Or if a critical member of the cryptocurrency community quits, it can cause widespread panic and a sell-off.

Whatever the reason may be, it’s important to remember that cryptocurrencies are still in their early stages and are highly experimental. While cryptocurrencies have a lot of potential, it’s impossible to know what will happen in the future. Above all, it’s important for people to remain calm and not panic when investing in cryptos as they may drop considerably before increasing once again.

Market manipulation

Cryptocurrency markets are often the target of market manipulation. As we all know, a small number of investors can move prices up or down at will. This means that investors can make a lot of money by manipulating the markets. They can do this by buying a lot of coins when the price is low and then selling them when the price goes up.

What is a cryptocurrency whale?

Cryptocurrency whales are individuals or entities that control large amounts of bitcoin. Whales hold enough cryptocurrency that they have the power to significantly manipulate currency valuations. Cryptocurrency whales are often blamed for the price fluctuations of digital currencies.

Why do whales cause such drops in value?

Well, first of all, it’s important to understand that not all whales are bad. In fact, some whales are actually very beneficial to the overall health of a cryptocurrency network. They act as market makers and help to stabilize prices.

However, some whales engage in manipulative practices. For example, they may buy up a large amount of a currency when it’s priced low, then sell it off at a higher price when the market is bullish. This can create artificial inflation and deflation cycles which can be very damaging to a currency’s long-term financial stability.

How to survive volatile crypto markets

When whales sell their coins, it can cause the price to drop significantly. This can be frustrating for people who are invested in cryptocurrencies because it can seem like the whales are manipulating the global crypto market.

If you’re worried about whales crashing the market, there are a few things you can do to protect yourself. The first is to diversify your investments. Don’t put all your eggs in one basket.

If you have money invested in different cryptocurrencies, it will be less affected if one of them crashes. For instance, if Bitcoin drops, but you have also invested in Ethereum, any losses might be canceled out.

Another thing you can do is to keep an eye on the news. When a whale sells their coins, it’s often because they have bad news to share. This will affect the market price, which is why they sell their coins before sharing their news with everyone else.

Some cryptocurrency market downturn is normal

Cryptocurrencies are known for their volatility – they can rise and fall in value very quickly and determining why can be hard to say. It could be due to government regulation or market manipulation – but it’s usually because of hacks that happen where large amounts of cryptocurrency are stolen by hackers.

The good news? This volatility doesn’t mean you should panic sell. Instead, if you’re an investor with long-term goals, keep your eye out for these common indicators when determining whether it’s time to buy or sell.

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