These reasons are always monitored by any trader, as they are considered fundamental factors in determining the next step that the trader should take to protect himself from losses.
By the way, these decisions are 'unpredictable'. That means all the information mentioned now is just information that concerns any trader; he should be 'anticipating their occurrence' and be 'prepared' to act accordingly later (if they actually happen).
What I just said is called 'risk management', which is another topic I will touch on later, God willing, in a detailed video on the channel.
Now let's move on to discussing the factors influencing price declines. These are some of them and, in my opinion, the most important by far.
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1. Government and regulatory decisions
When governments issue sudden strict decisions like banning trading or imposing new taxes, even though these decisions are often 'temporary' and not permanent, the goal, in my personal opinion, is to manipulate prices or something similar to create an artificial downturn.
However, this causes panic among traders and investors, leading to a mass sell-off of assets. For example, in 2021 when China banned cryptocurrency trading and Bitcoin, this caused a significant drop in prices.
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2. Collapse of trading platforms or hacks
When we see a hack or collapse of a major trading platform, the markets quickly enter a state of 'loss of confidence', and as usual, the selling of these assets begins, and the decline resumes. Investors and even traders start withdrawing their money to preserve the cash they have or move to a safer investment to maintain the value of their money.
Source:
Investopedia – Crypto Hacks
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3. Whale selling
"The term whales refers to a small group that holds massive amounts of a certain asset or cryptocurrency." When these groups decide to sell all at once or most of them, a situation called
Whale Dumping
At that time, prices obviously drop sharply. Small investors and traders start selling out of fear of further collapse in the price of the asset or cryptocurrency.
Source:
CoinDesk – Whale Activity
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4. Trading with leverage and liquidations
A large percentage of traders use leverage (borrowing) to achieve significant profits quickly. However, any slight decline in currency prices leads to forced liquidation, or what they call 'liquidation' of traders' positions. This causes a cascading, cumulative, and escalating negative impact.
Source:
Cointelegraph – Leverage Risks
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5. Market Sentiment (Fear and Greed)
Financial markets in general, and the cryptocurrency market in particular, can be described as a 'teenage and emotional girl' that is affected by a very simple word or movement, causing it to collapse quickly.
The cryptocurrency market is affected even by rumors, which are often untrue and most people know they are rumors. For example, do you remember on April 7 (four days before writing this article), when news spread about President Trump saying he would impose a 90-day halt on tariffs for all countries as a 'truce'? At that time, stocks and even cryptocurrencies surged with a long green candle.
Later, the White House denied the news and said it was 'just rumors'; the markets collapsed again to the same low prices. Then on April 10, they announced that things were fine and there was indeed a truce. The markets rose again. This is the reality, and these are matters that cannot be predicted or known when they will happen, how long they will last, or why they happen.
Even major figures like Elon Musk, just a simple statement from him can positively or negatively affect a particular cryptocurrency or the market as a whole. This actually happened before when Elon Musk spoke negatively about Bitcoin, claiming it has a negative impact on the environment. At that time, Bitcoin and other cryptocurrencies collapsed. And so on.
Source:
Forbes – How Sentiment Moves Markets
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These matters must be kept in mind when considering entering this field. Do not follow emotions or think of it as a 'quick and large profit-making' field. This is a bad rumor about the field and is not true.
The field of cryptocurrencies is a very dangerous area for everyone, especially for beginners. I do not advise any beginner to enter this field or deal with people who promise you great wealth quickly from cryptocurrency trading.
This last warning pertains to cryptocurrency trading in countries that prohibit this field. Do not trade or approach the cryptocurrency field if your country does not allow it. This could lead to strict legal actions. Please be cautious.
If you want to open an account on an official platform authorized to operate in most countries of the world, your best option is the Binance platform. Here is the link to the platform:
https://www.binance.com/referral/earn-together/refertoearn2000usdc/claim?hl=en&ref=GRO_14352_TDZJD
