The influence of macroeconomic factors on crypto prices

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When we talk about macroeconomic is deals with the economy of a nation or state at large, how the economy of a state is faring and things like interest rate or other economical data that plays a role in the economy of a place like unemployment data and other relevant data's, so I am going to write about how or ways that macroeconomic factors influence the cryptocurrencies market prices.

Macroeconomic factors that might influence cryptocurrencies

Well most of the world's economy is facing inflation or even deflation today and due to this reason it has positively impacted the price of cryptocurrency, take bitcoin as a case study which is a very scared asset because of it's limited fixed supply unlike fiat this makes many to run to it when there are such incases of inflation, like the case of naira now which is rapidly losing its value against the us dollar and in this cases it makes many to run to bitcoin for safe heaven to provide a hedge against the ever deprecating currency and ofcourse this helps to boost bitcoin prices as well as affect the prices of other crypto asset positively.

Also another way macroeconomic could impact the prices of cryptocurrencies is when economic datas are released like interest rates especially which has the potential of impacting crypto prices negatively or positively depending, for instance if the interest rate data released by the central bank is higher it will make cryptocurrencies prices to reduce rapidly like we saw during 2022 and 2023 whilst when the interest rate is lower it will make cryptocurrencies more appealing which will make people venture into as a good investment and hedge.

Also at times the economy of a country experience a period of instability or during election period which is filled with major uncertainty as we often see during us election which tends to have an impact on the market due to its being a major world economy most times the results of this geopolitical election has an impact on cryptocurrencies prices due to the economic uncertainties that comes with it this could either drive crypto up or downward depending on the general feeling of the public.

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Also uncertainty in cryptocurrencies regulations is one thing that determines the price of cryptocurrencies, it is one way to know what or how a crypto asset could fare interms of prices, most times when SEC(Securities and exchange commission) is coming after a crypto asset is often leads to sharp decline in the price of that asset as many view the asset at the time as potential security risk unless the case is won many may pull money off such asset so in most cases when the regulations is tight on a cryptocurrencies asset is leads to a negative reaction of price whilst if the regulations are favourable to cryptocurrencies then it leads to a positive price reaction.

Also apart from all this also the price of cryptocurrencies is also being influenced by liquidity of the market that's the liquidity of the general financial markets indeed impact cryptocurrencies prices greatly especially that of the traditional markets, most times the prices of stocks and crypto moves in tandem with each other, if they are going up so will bitcoin if they are falling only a matter of time before bitcoin follows suit, so the market liquidity of the financial market in general has an impact in cryptocurrency prices.

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Conclusion

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As investors in this market we have to understand that macroeconomic play a role in determining the prices of cryptocurrencies so we have to know how to analyze not just charts but keep ourselves updated with the current economic event especially those of major player countries like the united states and European countries in general as this is very crucial in knowing the reaction of the financial market and major and big economy in asia like China for instance.