Strange reasons behind the rise in cryptocurrency prices

Cryptocurrencies such as Bitcoin, Ether and Dogecoin have soared to highs that few investors expected a year ago.

What prompts traders to wonder about the possibility of prices continuing to rise and the reasons that led to the rise in the prices of those currencies!

A group of strange reasons led to an increase in the obsession with cryptocurrencies, the most important of which was the wave of optimism that the markets witnessed after the rise of “GameStop” shares earlier this year, in addition to the fact that some of the money that was available to large segments of society from government stimulus checks that found It also made its way to brokerage accounts that offer free trading.

People spending too much time at home and in front of screens during the pandemic has also motivated people to buy cryptocurrencies.

Investors say restrictions on stock trading by brokerages earlier in the year may also have pushed some Reddit traders into cryptocurrency.

Tesla CEO Elon Musk's sponsorship of Bitcoin and Doug Coin, and the listing of Coinbase Global in the US spurs momentum in the cryptocurrency exchange.

What is behind Bitcoin?

The “Wall Street Journal” says that the craze in the trading of non-fungible tokens, NFTs, has led to an explosion of activity on the Ethereum currency. for this technique.

NFTs are Bitcoin-like tokens tied to a digital artwork or other real-world item and sold as unique digital property.

The power of social media

In a year when individual investors used social media to drive up asset prices, the markets haven't seen any movement as strong as the Dogecoin rally.

It's a cryptocurrency that was created as a joke but has soared and its total market capitalization swelled to more than $80 billion at its 2021 peak earlier this month, compared to less than $600 million at the end of last year.  

Dogecoin's creators never intended it to have any meaningful value, but that coin is expected to rise due to momentum in social media.

But Dogecoin's wild volatility is a warning to Bitcoin investors, too.

Although early supporters of the cryptocurrency point to its usefulness as an inflation hedge or store of value, it does not have a long history, and its value is closely linked to sentiment and momentum.

If sentiment turns against it, its price could drop.

Although Bitcoin bulls like to point to expanding acceptance among institutional investors as a major driver of the rally, there are signs that institutional demand has picked up in recent months even as the price has risen.

The number of large bitcoin transactions, which are usually conducted by professional money managers, also decreased slightly in the first quarter of the fourth quarter, according to a report by cryptocurrency exchange OKEx.  

Cryptography in context

Thanks to the massive rise of Bitcoin, Ether and Dogecoin, the value of the total cryptocurrency market has swelled to over $2 trillion, down from $260 billion last year.

Dogecoin has a market value of about $67 billion.

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