Reasons behind cryptocurrency market dumps ||

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When we talk about market dump there are certain things that actually contribute to this and for as long as the cryptocurrency market remains it seems there will also be times when we will experience downswing that's become something of a normalcy in this space especially as long as all the issues facing cryptocurrency remains like the regulatory challenges.

The thing really is every market traded always have a period of relative uncertainty where things take an unexpected turn and go even far beyond expectations either positively or negatively, it's true that most times it seems the cryptocurrency market which is renowned for it's volatility often experience this more especially both upward or downward movement, it always seems to move a hell lot more.

When there is dumps like major dumps in the cryptocurrency market there are a lot of factors that do contribute to this and in my earlier post on this topic I did my best to touch down on some of this factors and truly I believe they are the reason why we might see some dumps in the market, mind you it's become something of a natural occurrence that's cryptocurrency market dumps.

From time to time due to one factor or another the cryptocurrency market actually experience dumps that's undeniable and should be expected by now, as it is I will be writing further on some of these reasons as to why this is so as it have become something of a normalcy hence it's important we understand the reason why it happens.

Some things that contribute to crypto market dumping

Well there are certain things relating often to technical aspect which also contribute majorly to the dumps in the market, when I talk about technical issues I mean technical fault in the network depending on the network ofcourse, some network experience difficulty probably when there is high number of users much more than a network can carry, I mean scalability issues in a network often lead to people looking else where for a more suitable network, my point is technical issues in a network of problem often leads to buyers not being willing to buy in or even those that hold to sell the one they hold for a more suitable network which leads to dump in that particular asset.

Technical aspect could also include technical analysis, I mean everyone always want to look for a reason behind dumps like there is a core underlying factor but most times it's simply based on technical analysis and that's to say the chart of that particular asset let say Bitcoin is on a rising wedge forming on a daily timeframe maybe it's around $68k and the target of that rising wedge is around $50k and ofcourse suddenly one day news comes out and in few hours bitcoin went crashing from $68k to $50k and we are like what news is that, but the chart is already showing it, it shows why it will happen and even the target so to speak.

So at times when there is crash in the market we must understand that is probably due to the fact that the chart is already leaning towards that direction so sometimes when a dump occurs it could be just a normal reaction to the market and playing out what the patterns are already showing so this is often another reason for dump in the market.

Sentiments often affects this market, infact there has never been a market so moved by market sentiments than the cryptocurrency market, this market is often affected by sentiments it actually goes a long way to influence cryptocurrency price, the value of a coin is often influenced by market sentiments and this often leads to dumps also depending on the general feeling of investors at the time.

Sentiments vary it could be that of hope and confidence, when there is general confidence to the point that it affects everyone and the hype of it all it really drives price up and investors have their confidence boosted to an extreme high level and this makes the flood into the market but when there is a certain feeling of negativity about a coin or when people feel a coin is greatly or rather overvalued they tend to take their money out and put it in something else and this often contribute to sharp decline in the market when large number of investors pull out their money from a project because they feel it's greatly overvalued it leads to major dump in that asset.

Liquidity is also one of the factors that leads to dumps here, cryptocurrency is considerably a younger asset class compared to other traditional asset which means that the stocks and bonds tend to be more liquid than cryptocurrency and for this reason it also means that the cryptocurrency is not really as liquid as others, which means sometimes when there is dumps in the market the fact that cryptocurrency market isn't as liquid kinds of leads to this dumps being even more extreme than it should be.

So the liquid issues in cryptocurrency market is one of the reasons too why the market faces dumps or why the losses are rather exacerbated.

Conclusion

So ofcourse there will always be a reason why market may dump so it's all depends on us to be careful on how to approach the market and while we invest we must be willing to accept the risk that comes with it.