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The role of economic indicators in predicting market trends for the Crypto Currency
The growth of the Crypto Currency was almost meteoric, and prices fluctuated wild and unpredictable in a few hours. Although many have welcomed the decentralized nature of the Crypto currency as the liberating power for individuals around the world, only a few have recognized a key role that plays economic indicators in the design of market trends.
What are economic indicators?
Economic indicators are measuring information that follows the health and performance of economics and give an insight into the entire state. These indicators can be divided into different categories, including inflation rates, GDP growth, interest rate, employment figures and trade loan. Analyzing these indicators, economists and investors can better understand how they can influence market conditions.
The link between economic indicators and the price of cryptocurrencies
Crypto currencies are known for high volatility, and prices often suffer fast fluctuations in response to various economic events. Although many crypto currencies were associated with the growth and speculative purchase of frenzy, others experienced sharp changes after the fall of the entire economy.
Some important economic indicators associated with market trends in the crypto currency are:
- Inflation rates : When inflation rates rise, investors become more optimistic about future investment yields. If the inflation is high, central banks can increase interest rates to contain demand and slow down economic growth.
- GDP Growth
: A strong GDP growth rate may indicate a healthy economy, leading to an increased confidence of investors and possibly higher cryptocurrency prices. In contrast, the poor GDP growth rate can signal an economic decline, which can lead to lower prices.
- Interest rates : Changes in interest rates by central banks may affect the performance of the crypto currency that are strongly related to markets with fixed income. For example, if interest rates in countries increase with strong economies, cryptocurrency currencies like bitcoin for investors seeking high yields can make less attractive.
- Employment data : Strong growth and employment data may indicate a healthy economy, leading to increased investor confidence and possibly higher CRIPTO currency prices.
- Trade Credit : Trade deficit or excess store can signal an imbalance in a global economy, which can lead to changes in the prices of cryptocurrencies.
Examples of economic indicators and prices of cryptocurrencies
Here are some examples in the real world that illustrate how economic indicators have influenced market trends of cryptocurrency currency:
- 2013: Bitcoin’s rise
In 2013, when GDP growth in China slowed down, the price of Bitcoin climbed and reached all the maximum. This is mainly due to a combination of factors, including increased interest and speculation of investors.
- 2018: American Chinese Commercial War
During the American China Trading War 2018, Chinese Juan is largely compared to the US dollar, which has led to increased demand for cryptocurrencies like Bitcoin and Ethereum. As a result, the prices have increased rapidly.
- 2020: Pandemia Covid-19
In response to Coidid 19 pandemi, many central banks have performed emergency measures around the world to support economies, including negative interest rates and fiscal stimuli packages. This has led to an increased confidence of investors in cryptocurrency currency such as bitcoin, where the price has increased significantly.
Diploma
The connection between economic indicators and the price of cryptocurrencies is indisputable, with each indicator playing an important role in the design of market trends.
