News and Market: How Global Events Affect Cryptocurrency Prices
On August 5, 2024, the cryptocurrency market experienced a major shock. Bitcoin fell below $50,000 for the first time that year, and Ethereum was close to breaking through the $2,000 level. The decline affected almost all digital assets, with altcoins also dropping significantly. The reasons for this collapse were two major events: a sharp escalation of the conflict in the Middle East and disappointing unemployment data in the US. The very next day, the market began to recover, prices rebounded and returned to previous levels. This case clearly demonstrated that cryptocurrencies are no longer isolated from the global economy. Today, digital assets are influenced by the same macroeconomic and geopolitical factors as traditional financial markets.
The history of the cryptocurrency market knows many examples where external events had a significant impact on prices.
The Start of the COVID-19 Pandemic
In early 2020, Bitcoin rose on news of a new virus, climbing from $7,200 to $10,500 by mid-February. But with the declaration of the pandemic and the start of large-scale panic in global financial markets, the situation changed dramatically. On March 12, 2020, Bitcoin collapsed from $7,900 to $4,800 in just one day. The total market capitalization of cryptocurrencies shrank by nearly $100 billion. The reasons were massive investor flight to cash, liquidity problems on exchanges, and panic on traditional stock markets. Recovery began after the launch of large-scale economic stimulus programs and interest rate cuts. By the end of 2020, Bitcoin hit a new all-time high, confirming its role as a safe-haven asset in times of inflationary risks.
The Impact of Elon Musk and Tesla
After the announcement of Tesla’s $1.5 billion Bitcoin purchase and plans to accept it as payment for cars, the market reacted with a sharp rise. Bitcoin jumped from $39,000 to $46,000 in one day. But in May of the same year, Musk triggered a decline by announcing Tesla would stop accepting Bitcoin due to environmental concerns. The price fell by 16 percent. These events showed how much the position of one influential person with a large audience can impact the market.
China’s Bans
In 2021, China tightened its cryptocurrency policy. The ban affected not only trading and exchanges but also mining operations. This was a major blow to the Bitcoin network as over 65% of its hash rate came from China. Miners migrated en masse to the US, Kazakhstan, Canada, and other countries. Despite a temporary drop in Bitcoin below $30,000, the network and price quickly recovered.
The Collapse of Terra/LUNA
In spring 2022, the Terra ecosystem collapse wiped out over $40 billion in market capitalization. The UST algorithmic stablecoin lost its peg to the dollar, causing panic and hyperinflation of LUNA. Trust in algorithmic stablecoins was undermined, and countries began developing regulatory measures for such assets.
The Bankruptcy of FTX
In November 2022, FTX, one of the largest crypto exchanges, declared bankruptcy. It was revealed that client funds were used for risky investments. The exchange failed to withstand the liquidity outflow. Bitcoin fell from $21,000 to $16,000, Ethereum from $1,600 to $1,100. The event highlighted the risks of storing assets on centralized platforms.
Positive Events
In spring 2021, the US economic stimulus program of $1.9 trillion triggered a capital inflow into cryptocurrencies. Bitcoin rose from $40,000 to $61,000, Ethereum from $1,500 to $2,500. The market was also supported by the approval of crypto ETFs and the development of Layer-2 technologies.
Cryptomarket Patterns
Prices often react to rumors before official news. The market is sensitive to macroeconomics, regulators, and manipulation. It is important to recognize signals and use them wisely. Positive signals inсlude rate cuts, ETF launches, institutional investments. Red flags inсlude rate hikes, bans, major bankruptcies, geopolitical tensions.
Global events have become part of the crypto market’s reality. They bring risks and opportunities for those who analyze the situation and make informed decisions. The investor’s task is to use these events wisely and turn them into a source of new prospects.