Crypto investors will know that the market can be influenced by a number of external factors. As a result, it’s important that investors stay on top of key events, news, and dates so that they don’t get caught out by big changes. One influencing factor that often goes overlooked by crypto investors is the traditional finance market.
Even though cryptocurrency is a market of its own, traditional finance and crypto can impact each other. Therefore, it’s important that investors keep up with wider economic news. Here, we take a look at how the economy can influence the crypto market and the steps you can take to stay on top of it.
How does the global economy affect crypto?
The global economy can have a big impact on the crypto market because cryptocurrencies are part of the broader financial system. The value of cryptocurrencies can be directly affected by the performance of economic factors including interest rates, inflation, economic stability, and government policy.
For example, if the economy becomes unstable, investors may turn to alternative assets in a bid to protect their wealth. In this case, the demand for cryptocurrencies could increase which would push up the value of various tokens. On the other hand, a strong economy could keep investors away from crypto assets and instead steer them toward traditional financial instruments.
The strength (or weakness) of an economy can be assessed by looking at several key factors. However, one of the easiest ways to keep up with the ever-changing economic landscape is to regularly read economic news.
The news is a great way to get a sense of whether the global economy is doing well or not so well. If the general news sentiment is negative, this could be a sign of a weak economy which is something that crypto investors should be aware of. The effects of economic news on the crypto market can happen quickly. As a result, it is important that investors are aware of major news stories as soon as they hit the headlines.
Recent economic events that have influenced the crypto market
A good way to understand just how influential economic news can be on the crypto market is to take a look at recent examples of events. The crypto market is highly volatile and prone to price fluctuations, although the past few years have been the pinnacle for the crypto market as we have seen a significant increase in the adoption of crypto worldwide.
Inflation
In recent years, countries around the globe have experienced rising inflation which has encouraged more people to invest in alternative assets such as cryptocurrencies. This has helped to push the prices of many crypto assets up and has increased the rate of adoption. Bitcoin has benefitted from this in particular because it is widely believed that it can act as a hedge against inflation. However, tokens such as ETH have also become more popular as investors try to protect their wealth against inflation rates.
The US Dollar
The US dollar has been the primary reserve currency for decades, however, it has recently taken a hit and many countries are abandoning the currency as their primary reserve. This is an indication that the dollar is weak which has led many investors to turn to crypto instead.
Alternative investments such as gold, silver and crypto tend to do well when the dollar is weak.
FTX collapse
The collapse of the crypto exchange FTX saw the prices of some assets drop. When the story broke, market sentiment quickly turned negative and investors sold their cryptocurrency in favor of more stable asset classes. The FTX saga has continued to cause volatility in the market. The event lost the trust of cryptocurrency investors and has meant that many people are still unsure about the safety of investing in crypto.
China’s crypto ban
In 2021, China banned the use of cryptocurrency. This caused global fear and saw many investors sell their assets before prices took a drop. Before the ban, China was one of the main hubs for crypto mining and also had a large number of investors. The move sparked concern that other countries may follow in China’s footsteps, but crypto has remained legal in most jurisdictions. Nevertheless, the move showed how easily crypto can be banned which has left many people unsure of the future of cryptocurrency.
How to keep up with economic news
Keeping up with economic news is no easy feat. Every day, thousands of new stories are posted online and only a handful of these would directly affect the crypto market. Here are some useful tips for keeping up with economic news.
Use an economic calendar
An economic calendar is a useful tool that includes key dates in the global economic diary. As an investor, you could use an economic calendar to prepare for upcoming decisions that could affect the crypto market. Feel free to visit this free economic calendar for investors to get started. The best economic calendars will list the dates of interest rate decisions, earnings reports, and even inflation rate announcements. Using a calendar makes it easy to stay on top of when these events are happening.
Set news notifications
Breaking news stories happen quickly and investors who don’t act straight away could get caught out! You can avoid missing important announcements by setting news alerts on your mobile phone or through your desktop. This will allow news notifications to appear on your screen which will make it easy to stay aware of key events and act accordingly.
Subscribe to a newsletter
Newsletters provide a rundown of the latest news straight to your inbox. This is a great way to stay up to date with key stories and can also help to make the news easier to digest. Newsletters often summarize key stories to present only the information that you need to know.
The economic news can have a direct impact on the cryptocurrency market. Therefore, all crypto investors should find a way to stay on top of the latest stories and events.