The role of financial indicators in the forecast of the cryptocurrency market trends
The rise of the cryptocurrency was nothing else from meteor, as prices varied wildly and unpredictably during hours. Although many were welcomed to the decentralized nature of cryptocurrencies as a liberating power of individuals around the world, few have learned that economic indicators play a critical role in market development.
What are the financial indicators?
Financial indicators are indicators that monitor economic health and performance by providing information about the whole state. These indicators can be divided into several classes, including inflation, GDP growth, interest, employment volumes and trade balance. By analyzing these indicators, economists and investors better understand how they can affect market conditions.
The relationship between economic indicators and cryptocurrencies
Cryptocurrencies are known for their high volatility, as prices often see rapid variation in response to a variety of economic events. Although many cryptocurrencies were related to growth and speculative shopping opportunities, others had a strong decline after the decline in the entire economy.
Some of the most important financial indicators attached to the trends of the cryptocurrency market, as follows:
- Inflation rate : As the inflation rate rises, investors become more optimistic to the return on capital. If inflation is high, central banks can be forced to increase interest rates to curb demand and slow down economic growth.
- GDP Growth
: Strong GDP growth may indicate a healthy economy, which increases investors’ confidence and potentially higher cryptocurrency prices. In contrast, a low GDP growth rate may indicate an economic downturn, which can lead to lower prices.
- Interest : Changes in interest rates can affect the performance of central bank cryptocurrencies, which are strongly linked to the fixed high market. For example, when interest rates rise in countries with a strong economy, cryptocurrencies such as Bitcoin can make it less attractive to high Yield investors.
- Employment figures : Strong workplace growth and employment number can refer to a healthy economy, which increases investors’ confidence and potentially higher cryptocurrency prices.
- Commercial balance : commercial deficiency or trade surplus may indicate the imbalance of the global economy, which can lead to changes in the prices of cryptocurrency.
Real examples of economic indicators and cryptocurrency
Here are some real examples that describe how economic indicators influenced the market orientations of cryptocurrency:
- 2013: Add Bitcoin
In 2013, when China’s GDP growth slowly slowed down, Bitcoin’s price increased rapidly and the whole time was high. This is largely due to the combination of factors, including increased investor interest and speculation.
- 2018: War of US and Kina Trade
In 2018, US -China’s trade wars will be strongly devalued against the US dollar, which increased the demand for cryptocurrencies such as Bitcoin and Ethereum. As a result, prices rose rapidly.
- 2020: Covid-19-Epidemia
In response to the Covid-19 epidemic, many central banks have taken emergency operations worldwide to support economies, including negative interest rates and tax stimulation packages. This increases investors’ confidence in cryptocurrency, such as Bitcoin, where the price has risen significantly.
conclusion
The ratio between economic indicators and cryptocurrency prices is undeniable because each indicator plays an important role in market development.