The demand for crypto has risen significantly across the different crypto exchanges today. While old investors seem trapped in the market due to the prolonged market corrections this year, new investors have considered this an opportunity for them to fill their bags with their favorite cryptocurrencies at low prices too. Other investors who believed that the market has floored after Bitcoin fell below the $16K level are also using this opportunity to fill their bags.
Has the crypto market floored? What are other reasons behind the current rise in demand for Cryptocurrencies today? Why is the price of Bitcoin still low despite the rising demands for cryptos across the different exchanges? This work will guide you on these important questions today.
Table of Contents
What is crypto?
The word crypto is a short form for referring to cryptocurrency. This term covers all the digital assets built around a Blockchain that serves for making decentralized payments online. Cryptos are virtual assets that have no real existence outside the internet. They need a network to function and for carrying out transactions.
Why is the demand for Crypto high despite the current market corrections?
The recent reduction in the rate of the Fed’s aggressive interest rate hike which came down to 50 basis points after a series of four consecutive hiking by 75 basis points; has given investors more reason to suppose that the Fed may have gotten to the pivot point in hiking the interest rate, and will likely disembark from hiking the interest rate from 2023. Many investors have therefore considered the recent dip after the FOMC session held on 14th December 2022, as an opportunity to fill their bags before the market takes off again. Consequently, the demand for crypto rose significantly in December, compared to the previous month.
Added to this, the fact that Bitcoin had managed to stay above $16K for the past four weeks after creating a new low at $15461 in November had led many investors to suppose that the floor for the market had been established. With the market continuously ranging above this level, many investors are considering it an opportunity to buy cryptocurrency, causing the demand to rise all the more.
Above all, many who believe that crypto is the future of money have always seen each dip as an opportunity to acquire more cryptos. Thus, these sets of investors are currently pushing more demands into the market in their quest to acquire more cryptos at lower prices.
Factors that move the crypto market
The crypto market is largely moved by fundamental factors which cause investors to either invest or withdraw from crypto. Various fundamentals such as: Interest rate hike, inflation data, FUD, Fiscal Policies (taxations), Tapering, Quantitative easing, etc, drive strong volatility in the crypto market. At each point, the market responds to these data based on the principle of demand and supply.
How does demand affect the price of crypto?
Generally, the crypto market is governed by the law of demand and supply. Whenever there is high demand in the market for a given cryptocurrency, the price is expected to rise. The rise in prices due to high demands is inversely proportional to the total supply of the coin.
Notwithstanding, the fact that the price of Bitcoin is still sluggish in rising despite the increasing demand, points to the possibility of old investors gradually leaving the market with each rise in price. This creates further doubts whether the price of Bitcoin has bottomed at this level, or whether to expect more dips.
