Why do cryptocurrencies fall and rise so dramatically?

Unregulated asset

First of all, cryptocurrencies are unregulated assets. That means that central authorities, such as banks and regulatory authorities can’t affect cryptocurrencies in the same way as they usually can with regular currencies and assets. See the stock market for instance - here, central authorities can regulate the price of assets with the purpose of stabilising the price. But that’s not a possibility with cryptocurrencies, as cryptocurrencies are decentralised currencies. Read more about the meaning of decentralised in our blog post “What is cryptocurrency?”.

Media hype also affects prices

Secondly, cryptocurrencies are new and exciting assets. When celebrities such as Elon Musk are tweeting positively about dogecoin , it will make the rate of dogecoin rise very explosively. 

For example, in 2022, Elon Musk tweeted that he, in spite of the rising inflation, wouldn’t sell his different crypto investments - dogecoin being one. That made the price of dogecoin rise by 7%. 

The prices of cryptocurrencies will always be driven by supply and demand, and when a cryptocurrency is very popular, the demand will also be large, making the price go up.

The reverse situation could also happen. If negative news about a cryptocurrency is spread in the media, the price can fall drastically.

In 2021, Elon Musk appeared in the program “Saturday Night Live”, and claimed that dogecoin was a “hustle” during a sketch. 

That made prices drop by 36% compared to before the program was aired. 

Examples on volatility

To exemplify how volatile cryptocurrencies could be, here’s an overview of widespread cryptocurrencies and what their yields were in 2021.

As you can see, cryptocurrencies can give a large yield. On the other hand, cryptocurrencies could also lose their value very quickly.

For example, this happened with terra (LUNA) which in the overview above had a positive year in 2021 ,with a yield of almost 13,000%. 

In 2022, terra experienced a sudden crash, and between May 11th and 12th, the price dropped by 96%. 

Read more about terra's story here .

STEP-BY-STEP GUIDE: HOW TO INVEST IN CRYPTOCURRENCIES WITH LUNAR BLOCK

If you want to try your hand with cryptocurrencies, Lunar Block is a good place to start. You have access directly through your Lunar app.

Lunar Block is designed in a way that everyone can join. The platform is Danish, and there are no incomprehensible buzzwords, and the prices are transparent. 

Like that, you’re never in doubt with what you’re dealing with, and you can trade with complete peace of mind. 

Cryptocurrencies can rise and fall

When you trade cryptocurrencies, you need to be aware that it carries a large risk. The value of your cryptocurrency can both rise and fall, and you can risk losing the entire amount you’ve invested in cryptocurrencies.

Cryptocurrency trading is done through Lunar Block. Lunar Block is not regulated by the Danish Financial Supervisory Authority (Finanstilsynet). That means you won’t have the same protection as when trading e.g. stocks or other regulated assets.

We do not counsel

We do not advise on currencies and do not make recommendations for either buying or selling. We can provide factual information about the different currencies, but past price developments are not an indication of future developments. No information from Lunar Block should therefore be considered as recommendations and all decisions are up to you alone.