AS INFLATION levels in the UK reach 10.4 percent, crypto investors are being advised to act with caution.
Inflation has risen 0.3 percent since January as a result of the price hikes in food, clothing, and hospitality. Crypto guide Trading Browser offers BV readers some insights…
Crypto crashes mainly involve insufficient liquidity from coins on exchanges during larger sell-off periods. Once the price starts to fall, the lack of buying support amplifies the drop. With no buy orders to absorb the sells, the coins go into free-fall.
Panic selling can cause a radical drop in values — which causes a dilemma for many investors. Do they sell more, or buy into the dip in the hope of future rewards?
It’s best to consider the options before trading on emotion, say experts. It depends on whether the personal crypto journey is for the long- or short-term, they advise.
Bitcoin and some other cryptos can be viewed as commodities, with prices driven by supply and demand. As a general rule, investors seek security during times of uncertainty. People are likely to pull money out of crypto or sell up, which can drive the value down.
Cryptocurrency doesn’t have a long history alongside inflation. Staying on top of current affairs, as well as crypto news, can help investors to make more informed decisions. Seeking security in more stable investments, such as diversified index funds, might be advisable.
A spokesperson for Trading Browser said shifts in the economy and in government policy could have an effect on investments and holdings. “The positive to these inflationary changes is that cryptocurrencies are not actual currency, and don’t respond to pressures in the same way.
“But this also means the crypto market can be very unpredictable and … it’s hard to say what might happen next.”
In the UK right now, the rise in costs may scare investors and cause market fluctuation, the spokesperson said.
“There’s no real way to predict the market or economic events … It’s all about gathering as much information as possible to try and make informed decisions.”