In the world of cryptocurrencies, the price dynamics of assets can vary greatly. Some coins make a sharp price jump and immediately find a growth point, while others decline slowly and gradually. Why does this happen? Let's consider the key factors.
1. Liquidity level and market capitalization
The higher the liquidity and capitalization of a cryptocurrency, the slower the sharp price fluctuations occur. For example, Bitcoin and Ethereum are less prone to sharp jumps compared to lesser-known altcoins, as large players support them in the market.
2. Speculative component
Small and lesser-known tokens often grow sharply when market excitement arises. Large players (so-called 'whales') can buy such coins, provoking rapid growth, and then dump them, causing an equally sharp decline.
3. Manipulations by large holders
If cryptocurrency is concentrated in the hands of a small number of investors, they can artificially raise or lower the price. This is called 'pump and dump.' In such cases, the price can soar sharply and then fall just as quickly.
4. Fundamental factors and news
Positive news (new partnerships, technological updates, listing on major exchanges) can contribute to an instant rise of the coin. However, if the project faces problems (hacker attacks, regulatory restrictions), its price may fall slowly as investors gradually lose confidence.
5. Attitude towards Bitcoin and the overall market condition
When BTC rises, altcoins may follow, but at different speeds. However, when Bitcoin falls, some assets immediately lose value, while others hold on longer due to long-term investors.
6. Strategies of large players
Some institutional investors or funds gradually exit assets without causing sharp price movements. This leads to a slow decline of the coin. In other cases, traders take profits instantly, leading to a sharp drop.
