Sharp rises and falls in the value of bitcoin, in contrast to the stock or foreign exchange market, mainly depend on big news and the mood of speculators, they are not associated with fundamental factors, although sometimes the dynamics of prices for different assets coincide, said Sergey Romanchuk, President of the ACI Russia - The Financial Markets Association, Report informs with reference to RIA Novosti.
“The changes regarding bitcoin should not be linked to the stock or foreign exchange market, as there is no stable relationship here. The volatility inherent in crypto assets is their peculiarity because the price for them is determined, first of all, by the mood of crypto enthusiasts, which can be spurred on by certain influential persons,” he said.
The expert noted that the same fears and events, such as the COVID-19 pandemic, can sometimes affect different markets, but the main thing here is that a kind of emotional atmosphere is created and it affects the value of bitcoin, which occupies the bulk of the capitalization in the cryptocurrency market.
Romanchuk gave several examples of the impact on the dynamics of bitcoin. So, the decision of Elon Musk and Tesla to invest in bitcoin, as well as the desire of some classical financial institutions to provide access to a wide category of customers to operations with digital assets, spurred the cryptocurrency to a boom.
After the same Musk said that Tesla would not accept bitcoins in payment due to the non-ecological nature of ‘mining’, plus the Chinese authorities opposed the ‘miners’ - and bitcoin began a strong downward movement.
“Such drawdowns in value have always been and probably will be. And if you rewind the tape of history, then bitcoin, after rising to $20,000, fell to $3,500. And the same kind of amplitude is possible in today's bitcoins, simply because stabilizers are not built into the pricing,” Romanchuk said.
So far, there is no direct connection between the amount of money invested in the stock market and crypto assets. When new money entered the global economy after the pandemic, it could not but affect the crypto asset market. That is, certain factors can push the markets up, but since bitcoin fell, investors ran to sell the S&P - this is unlikely,” he summed up.