What Factors Move the Price of Bitcoin and Cryptocurrencies? eToro gives its answer

Key facts:
  • Trade alliances, financing, and halvings and are the main bullish drivers.

  • Suffering a 51% attack is usually the most damaging event for the price of a cryptocurrency.

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A study published by the platform trading with stocks and cryptocurrencies eToro seeks to explain what the main causes that cause variations in the price of crypto assets.

Made like the commercial alliances of its developers, receiving financing for the project, or the proximity of a halving, lead the ranking of events that cause a positive increase.

More specifically, they claim: “the data shows that enthusiasm for a listing ad [en un exchange] or association, tends to disappear in a week; however, financing announcements and M&A announcements have positive effects that often extend beyond a week. ”

On the other hand, the 51% attacks are, among the factors analyzed, the cause of a greater fall in the price. “They show an average loss of 3.32% after a week,” they detail. They give as an example the case of Ethereum Classic (ETC) that, as reported by CriptoNoticiasAfter three such attacks in a row, it lost 36% of its price in just over a month.

The study also shows that one week after a airdrop (free and massive distribution of a certain amount of a certain cryptocurrency) enthusiasm dissipates and the price of the token usually falls by 0.69%.

Contrary to what might be expected, token “burning” tends to also have a negative effect after a week, although this occurs after an initial increase in the asset’s price.

He report eToro is spread over 45 pages. In them they illustrate with numerous examples, tables and graphs, each of the factors that, according to the research carried out, influence the price of cryptocurrencies.

The influence of Twitter on the price of Bitcoin and other cryptocurrencies

A special section of the report refers to the influence of Twitter on the price of Bitcoin and other crypto assets. This is the social network that has predominance to express itself on cryptocurrencies and related topics.

According eToroIn general, there is a certain relationship between the number of times tweeting about a specific cryptocurrency and announcements of significant developments that occur or are about to occur.

But they indicate that this relationship “is not extremely strong.” They add that “perhaps Twitter activity will only have an effect on certain significant development announcements” such as listing on a major exchange. These tweets influence the price.

The more tweets there are after a listing ad, the higher the price increase., which makes sense, ”they explain. They add that “the more people spread the word about a new ad, the more people will think about buying.”

They indicate that the same happens with airdrops and that, in reverse, this correlation also occurs. “If there is an airdrop and people don’t tweet about it, the price of the token will go down.” They clarify that “this is because an airdrop is like a free gift of a token, and if people do not see a reason to keep the token, then they are likely to sell it immediately.”

The price of UNI, during September, was correlated with the daily number of tweets about the token. Source: eToro

eToro acknowledges in the report that “it can be difficult to unravel whether the price is increasing due to increased activity on Twitter, or whether activity on Twitter is increasing because the price increases.”

“DeFi is here to stay,” says eToro

The report of eToro He also pronounces on the trend of DeFi (decentralized finance) and its relationship with the price of Ethereum. Compare to this boom, with the explosion of ICOs (initial coin offering) in 2017. Anyway, they clarify that “DeFi has not yet reached the levels of hype of ICOs”.

“The amount of Ethereum (ETH) deposited in DeFi applications in January 2020 was 3 million and has almost tripled (8.4 million) since then,” they say. The report adds that “from mid-2016 to 2018 the ICO bubble captured 16 million ETH”.

Because of the DeFi, eToro maintains a bullish sentiment on the price of Ether, the network’s native token on which most of these platforms and tokens are built. They assure that “DeFi is here to stay” and that the price of Ether will tend to increase.

“DeFi is still in its infancy and there will be bad actors and hacks unavoidable in some of these applications “, they explain. They add that “the attention that [DeFi] it has drawn towards ETH will continue to be a driving force for the future success of the protocol. ”

The report also shows that, since June mentions of DeFi in specialized media increase rapidly. “In the third trimester, DeFi was mentioned almost 500 times more than Ethereum, 2,500 times more than blockchain and 4,000 times more than Tether. The only two terms that exceeded DeFi were Bitcoin Y cripto.

Currently, mentions of DeFi in the media headlines outnumber mentions of Ethereum. Source: eToro.

eToro He predicts that the growth of the DeFi ecosystem will bring about a strengthening of Ethereum and an increase in its price. “Ethereum doesn’t need to be the best blockchain to be more successful“, Says the report and add that” community and sentiment are the most critical elements for the success of a project.

Anyway, as they clarify, the attempts to improve the network are not left behind in ETH. “The rapid increase in new users has also driven the levels of innovation that are occurring within ETH,” they say. They add that “projects and organizations are trying to address some of the scalability issues that contribute to high network fees.”

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The report referenced here is one of many produced by the eToro research team. Is it so available on your platform together with others educational resources to know the markets and increase the skills of trading.

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