Why Does the World Economy Affect the Crypto Market?

[KingsDen]

Re: Why Does the World Economy Affect the Crypto Market?

The crypto market does not exist in isolation. It is me and you that buy the cryptocurrency. I own some portion of bitcoin and likewise you. So, if there is a heavy war in my country, one or more of these things will occur to me;

• Buy more bitcoin because the fiat will crash
• Sell your bitcoin and have money to escape myself and my family
• What is the essence of HODLing, what if this war takes my life.
• Therefore, sell and give aims to the needy.

These are the reasons world economy affects crypto because the crypto people are humans. The government also are humans and that is why we have fundamental analysis in crypto.

[Lida93]

So, this pushes me to ask, does the involvement of the world government have more positive effect to the crypto market than negative?

_{I stand to be corrected in any area where I am wrong.}

Well, from what I have noticed from previous discussions taking interest in the involvement of the governments into the bitcoin market, is that, a lot of persons and when I say persons, I mean those that care so much about their privacy. These people are disturbed and concerned that the involvement of the government could interrupt a lot of privacy existence in the crypto ecosystem.  As anyone can easily relate that the government likes to control every financial system through their AML and KYC policies. And this is what some of us fear could be introduced in the near future as governments continue to adapt into the crypto market.

[pooya87]

I don't think any of the things you said including government involvement are the reason for global economy affecting the bitcoin market and by extension the crypto market.

The reason is pretty simple. It is the people who have to buy bitcoin and it is the people who sell it if they need to. When global economy goes bad (eg. during recession) the same people who have to buy bitcoin for its price to go up, no longer have that extra cash to invest. In fact the worse recession gets, the more they'll need their money to feed themselves. So they start selling bitcoin. Therefore it crashes.

So why is it more noticeable in the past couple of years only? That's because I don't think we had any major global economic problem between 2008 crisis (bitcoin was introduced in 2009) and 2019 (COVID pandemic that caused recession).