The Cryptocurrency market can be very confusing from a technology point of view let alone on a macro market level. There are many moving parts in the Cryptocurrency world which affects everything from price to the distribution of information, this article has been written to shed some light on those moving parts so you gain some understanding on how it all works together.
Brief description of each moving part
Red (regulators)– These are the regulators, they create the rules of society in which Crypto exists in, they have the power to stop all Crypto developments or investing simply by banning the purchase of Crypto via any bank account. Conversely, they can also accelerate innovation by writing friendly regulations which clarifies where all crypto projects stand within regulatory frameworks, also investors will know whether it’s legal for them to invest or not.
Purple (influence price)– Whales have significant funds parked in various projects and have the ability to manipulate price as and when they feel like it, their ultimate mission is to make profits (obviously) and they do this by taking money from retail investors by moving price and creating hype for retailers to invest their money. Then whales tend to sell and take that money of the table. Then rinse and repeat that over cycles.
Navy Blue (Liquidity and on-ramp) – Market makers provide liquidity by matching buyers with sellers and charging a fee on the spread, they essentially oil the system so it’s working properly
Crypto Exchanges are the gateway into Crypto and provide the service of buying/selling/swapping Crypto’s, normally for a fee.
Light Blue (Traders) – Retail traders are amateur investors/traders that look for patterns and trade of that but also invest in projects for long term gains. Hedge funds do the same however they are professional and have huge cash reserves to play with.
Orange (info distributers) – Media outlets. These include Twitter/Insta handles, news channels, online news sites and anyone else that conveys news. As the saying goes ‘News follows price’. The distribution of information serves two purposes, it creates a narrative and also informs the public of updates in regards to projects. More often than not though, a lot of real news is drip fed to the public. Projects are very careful to only give out what they need to give out.
Green (Crypto projects) – These are the creators of the Crypto world, they are the ones who turn ideas into products and services, they create the value within the market for everyone to eat from.
Each group has a part to play in the Cryptocurrency world and the more synergy there is between ALL the players, the more prolific the market will be. And the level of synergy between all the players is increasing at a rapid pace, governments and central banks are fast joining the action, creating regulation to support the use of Cryptocurrencies and giving them the green light.
We hope this article has helped you to gain understanding on the Crypto world, do let us know if you have any queries. DM us on any social media platform (links on the side bars)