Major Proponents for Bitcoin Price Action: A Detailed Guide
Most times, determining events that could have a significant influence on the price of Bitcoin and other cryptocurrencies can be difficult. There are many websites and so-called experts who charge huge sums to provide such information and courses on them. However, determining influential cryptocurrency events should not be expensive as you can discover them by yourself.
This is the aim of this article; to educate the reader on the significant events that affect Bitcoin’s price as well as how much influence they have. We will be examining some events and market participants’ activities that cause significant price action in Bitcoin as well as other cryptocurrencies.
Major Events that Positively Influence Bitcoin Price
1. Key Bitcoin developers announce crucial code modification
Influence rate: Medium
Whenever a key Bitcoin developer announces a new update in the underlying Bitcoin code, price is always certain to rally. This is because many big investors see it as a good opportunity to buy Bitcoin considering that an upgrade makes it more stable and thus reliable. A significant influx of big investors buying Bitcoin will unfailingly cause its price to rally.
2. Significant positive remarks on Twitter or other prominent social media
Influence rate: Low
As with any good or service, good publicity on social media is always a price booster. Consequently, the more people talk about Bitcoin on Twitter or other social media, the better the chances of price getting a boost.
3. Regulatory agencies endorse cryptocurrency use
Influence rate: Medium
Bitcoin price always records a significant price increase when regulatory agencies endorse or lift a ban on Bitcoin. An example of this can be seen in the Bitcoin bull run of 2017 when Indian authorities lifted their ban on Bitcoin trading and decided to tax it instead. It is believed that this act acted as a proponent to the bull run of 2017.
4. Bitcoin gets a security and scalability boost
Influence rate: High-Very High
According to the American Institute for Economic Research, major news on Bitcoin scalability injects significant price action. An example of such a scalability event occurred in 2017 when miners supported a scalability improvement known as SegWit. Just 3 days after the event, Bitcoin recorded a sharp 25% spike to the upside. That said, the next scalability announcement is expected to have a similar effect on the price of Bitcoin.
5. “Hidden hand” in the market
Influence rate: Very High
It is believed by analysts and other experts that there are unknown forces in the market that cause Bitcoin prices to surge. Due to the obscurity of this influence, there are no explanations for when or how they occur.
Major Events that Negativity Influence Bitcoin Price
1. Government-backed crypto firm takedowns
Influence rate: Medium-High
Taking down cryptocurrency-based firms by governments paints a very negative image for the underlying cryptocurrency. A few years ago, the Chinese authorities announced a takeover of a cryptocurrency firm in the country which immediately caused the price of Bitcoin to drop by about 14%.
2. Centralization of the network
Influence rate: Very High
Although this is very unlikely, a centralization of Bitcoin’s network would cause the price of Bitcoin to drop to a depth it might never recover from. For a centralization to happen, Bitcoin would have to depose over 9,000 public nodes and an additional 50,000 hidden nodes.
Also, losing miners can also cause the Bitcoin price to go into a tailspin as was witnessed in the March 13th Bitcoin crash where nearly 40% of BTC miners left the network.
3. Key Bitcoin developers leave the project
Influence rate: Low
A public exit of a key developer in the network could cause investors to become paranoid and flee the cryptocurrency which, consequently, would cause the price of Bitcoin to drop.
4. Bitcoin whale sell-off
Influence rate: Medium
Whales are traders with huge amounts of Bitcoin (1000 BTC and more). When whales trade, which happens infrequently, they pump-in a lot of volatility into the market causing the price to sway in favor of their trades. When a whale bets against Bitcoin, there’s no preventing the negative price repercussions that would follow.
5. Black swan events
Influence rate: High
Black swan events are very rare events with the power to destabilize global economies and financial markets. At the time of writing, the world is suffering from the Coronavirus pandemic (a black swan event) which has thrown the global economy into a recession and has disrupted almost every financial market including the cryptocurrency industry.
Activities of Market Participants that Influence Bitcoin Price Action
1. Retail traders influence
Influence rate: Low
Retail traders rarely cause the price of BTC to move irregularly. Retail traders could rally together to cause the price to go in a particular direction, however, this attempt can only hold water if a few whales are involved as well. Trends by retail traders can be easily disrupted by the slightest inconvenience.
2. Over-the-counter (OTC) traders influence
Influence rate: Medium
OTC are exchanges that occur through unofficial platforms like person-to-person transactions. Trades through this method are unregulated and open to unfair rates. The price of BTC and the transaction fee, in this case, is determined by the seller or how much the buyer is willing to pay. OTC transactions have been reported to charge as much as 15% on transaction fees in some cases.
3. Influence of exchanges, manipulators and artificial price pumps
Influence rate: High
There have been reports of cryptocurrency exchanges that secretly run third-party accounts, carry out questionable trading tactics, and partake in bribery and corruption. These exchanges have been operating undetected for years as a result of the weak regulatory presence in certain regions.
Exchanges are also notorious for using trading bots to create synthetic volumes with their personal cash. An expert report shows that about 86% of all cryptocurrency exchanges’ trading activity is likely to be “wash trading.” This practice remains largely unscrutinized and many perpetrators get away with it.
4. Influence of market insiders
Influence rate: High
Market insiders are closed circles of traders in the crypto market with incredible market influence. Some of these groups have gained popularity in the crypto space while others remain anonymous. Market insiders are mostly early miners or investors and they work together to make a profit by influencing long-term Bitcoin price action.
5. Influence of darknet markets
Influence rate: Low-Medium
The darknet comprises of people who carry out illegal purchases, sponsor terrorism, traffic drugs or humans, launder money, kidnap and blackmail other people, and carry out other criminal acts. Due to the decentralized, digital, and anonymous nature of Bitcoin, these criminals have adopted it as a payment system to fund their malicious acts. Their notorious use of Bitcoin has, in a way, provided free publicity for the cryptocurrency. Many people have adopted Bitcoin simply because it is used by this class of people. Needless to say that the illegal use of Bitcoin has also influenced the value of Bitcoin today.
6. Influence of whales
Influence rate: High
As explained earlier, whales are large cryptocurrency holders (>1000 BTC) who have an undeniable influence on price action. When whales make a trade, they typically cause a notable rise or drop in price.
Whales are not liked by retail traders as they disrupt the natural price cycle of Bitcoin unexpectedly.
7. Influence of “bulls and bears”
Influence rate: High
Bitcoin bulls or bears are traders that trade Bitcoin when there is a perceived trend thereby causing the price to continue further in that direction. Bulls and bears have a very strong influence on Bitcoin prices because they take advantage of the natural momentum of price.
Final Note
Staying informed on the activities of every market proponent mentioned in this article is a sure-fire way of staying ahead of the curve and making a profit in the Bitcoin market. However, relying solely on just one of these events may not always yield positive results. That said, be sure to connect 2 or more of the mentioned events and factors to confirm the next possible price breakout.
