Examining the up and down signs in the digital currency market; What risks threaten investors?

One of the well-known analytical institutes active in the field of digital currencies has recently published a report in which it examines the up and down factors affecting the future of the market. The points mentioned in this report are among the most important factors influencing the overall market trend.

To Report The Daily Hoodel, an analyst at IntoTheBlock, recently released a report on the state of the digital currency market, which appears to be still volatile at the beginning of the year, pointing to signs of ups and downs.

The analyst said the lack of confidence among investors would not allow the market to move forward. This distrust is due to the fact that there are good reasons for both the market to decline and the market to rise.

Reasons for the market to rise

The increase in the number of wallets holding Bitcoin, the increase in the number of Atrium transactions, and the change the network has made in managing its token supply are some of the reasons cited by proponents of the uptrend scenario.

In addition to the market’s top two digital currencies, they point to the growing popularity of monetized Chinese blockchain games, NFTs and DAOs.

Available data show that despite the recent decline in the price of bitcoin, more investors are holding it. In January 2018, 25 percent of traders sold their bitcoins after the price of bitcoin fell from $ 20,000 to $ 6,000.

According to the analytics company, the number of daily Atrium transactions, which remained stable during the previous market reform, decreased by 65% ​​just two months after the fall of 2018.

The Atrium Token Burning Mechanism, introduced after the London upgrade, the increase in the value of the OpenSea NFT trading platform to $ 13 billion, the pervasiveness of blockchain games and games, are other factors that support this scenario.

Also read: What is a DAO? Familiarity with the best projects of decentralized self-government

Reasons for the market to decline

Proponents of the downturn scenario use the US Federal Reserve’s actions, the possibility of a new outbreak of the Corona virus and the “four-year cycle” theory to explain their views.

The US Federal Reserve recently announced that it is trying to curb inflation by normalizing its balance sheet or using contractionary monetary policy. This approach also affects the price of bitcoin by reducing the supply of dollars.

Into De Block wrote in its report:

If the Federal Reserve reduces liquidity and raises bank interest rates sharply, the high correlation between the two will have a negative impact on the Bitcoin market outlook.

Another reason given by the proponents of this theory is that the price of bitcoin usually reaches a new peak every four years (2013, 2017, 2021) and falls the following year. According to them, in 2022, the spread of a new strain of coronavirus and the resumption of general quarantine are likely to hinder economic growth.

The report states:

In general, there are macro-level risks that investors need to be aware of. Although a number of reasons indicate that the growth of the digital currency market will continue in 2022, the lack of confidence in the market is quite felt. These market forces are likely to show up in the coming months; Because the US Federal Reserve’s actions make the market clearer and the activities of NFTs, games and DAOs, digital currencies [احتمالاً] It leads to new heights.