How Global Events Affect Crypto Prices

Cryptocurrencies have evolved into a major asset class that investors worldwide are paying attention to and making huge investment moves in.

First, it began with Bitcoin and gradually grew to thousands of altcoins. However, one characteristic of the cryptocurrency market is its volatility.?

There are many factors that affect crypto prices, but time and again, it has been proven that global events play a key role in influencing these prices, often resulting in dramatic rises and falls.?

As a crypto trader or someone looking to invest in crypto, it is essential to understand how these events impact crypto prices.

5 Ways Global Events Impact Crypto Prices

1. Political Unrest:

When governments face turmoil, citizens often seek alternative currencies to protect their wealth. For instance, during periods of high inflation or currency collapse, many individuals turn to Bitcoin for its decentralised nature, which provides a level of security not offered by traditional fiat currencies.?

In 2024, geopolitical tensions, including conflicts and government sanctions, are driving Bitcoin prices as investors look for ways to safeguard their assets. Recent reports show that during political instability in countries like Venezuela and Argentina, Bitcoin adoption surged, leading to significant price increases.?

2. Economic Uncertainty and Investor Sentiment:

Economic downturns, such as recessions or financial crises, can dramatically shift investor behaviour. Take the COVID-19 pandemic as an example. During the lockdowns in 2020, Bitcoin's price surged by over 300% as investors fled to cryptocurrencies as a hedge against potential inflation and economic instability.?

Such trends indicate that Bitcoin and crypto, in general, often act as a safe haven during uncertain economic times, driving their prices higher when traditional markets decline.?

3. Technology Advances:

The ongoing developments in blockchain technology, including smart contracts and decentralised finance (DeFi), enhance Bitcoin's utility, which can lead to crypto price increases.?

For instance, as cryptocurrencies become more integrated with new technologies that improve security and scalability, their adoption among businesses and individuals grows. Increased demand from users and companies translates into higher prices.?

Data from the cryptocurrency market suggests that every major technological breakthrough has historically been followed by a price rally, with Bitcoin reaching new all-time highs following significant upgrades and innovations.

4. The Role of Institutional Adoption:

When major companies or financial institutions express interest in Bitcoin, it tends to ripple throughout the entire cryptocurrency market. For example, Bitcoin prices increased after Tesla announced that it would accept Bitcoin as payment. Within days, the price of Bitcoin skyrocketed by nearly 20%.?

In 2024, growing institutional interest from major banks and retail giants further cryptocurrencies and crypto investments, attracting a new class of investors. This trend could lead to a more stable price as Bitcoin becomes more integrated with traditional financial systems.?

According to research, institutions holding Bitcoin can significantly impact the cryptocurrency market cap, increasing investor confidence and driving prices upward.

5. Regulation:

Favourable regulations can enhance confidence in the cryptocurrency market, while strict regulations might suppress it.?

Key Global Events That Have Affected Crypto Prices in 2024

1. Global Economic Slowdown:

One of the most impactful events on crypto prices in 2024 was the continued global economic slowdown. Inflation rates in the US, Europe, and parts of Asia remained high, leading to increased uncertainty in traditional financial markets.?

Many investors sought alternatives to fiat currencies, turning to Bitcoin and other cryptocurrencies. As a result, the price of Bitcoin rose nearly 15% in the first quarter of the year, as people viewed crypto as a hedge against inflation.

However, when central banks raised interest rates to combat inflation, crypto prices fell as investors retreated to safer assets like bonds.

2. Regulatory Crackdowns in Key Markets:

Another major factor was the regulatory crackdown on cryptocurrencies in several countries, particularly the US and China. In the US, stricter regulations on cryptocurrency exchanges, especially regarding anti-money laundering (AML) compliance, caused a decline in the prices of crypto assets.?

For example, in March 2024, Bitcoin’s price fell by 12% within two days after the SEC issued heavy fines to several leading cryptocurrency exchanges.?

In China, a further crackdown on mining activities also sent shockwaves through the market, reducing the overall hash rate, which briefly impacted Bitcoin's price discovery.

3. Geopolitical Tensions and Conflict:

With escalating conflicts in the Middle East and Eastern Europe, investors worldwide began moving funds into cryptocurrencies as a store of value. The price of Bitcoin, for instance, increased by 10% in July 2024, as global investors sought safer, decentralised assets in response to rising geopolitical risks.?

4. Institutional Investment and Adoption:

In 2024, more institutional investors, such as pension funds and hedge funds, added crypto to their portfolios. Major corporations such as Tesla and Apple made headlines with announcements of further investments in Bitcoin, driving its price up by 8% in October.?

According to Bloomberg, crypto's overall market cap increased by $200 billion in the third quarter of 2024, primarily fueled by institutional money flowing into the market.

How News Affects the Crypto Market

The impact of news on crypto prices is significant and can create substantial shifts in the cryptocurrency market. Publicly available information shapes how investors feel about cryptocurrencies, and this sentiment plays a crucial role in their trading decisions.?

Research shows that daily headlines can be classified as either positive or negative, with positive news typically boosting investor confidence and leading to higher returns.?

For example, during 2020, Bitcoin's price surged over 300% from around $7,200 in January to nearly $29,000 in December, primarily influenced by positive news surrounding institutional adoption and increased acceptance of cryptocurrencies.?

On the other hand, negative news tends to create uncertainty, which can cause crypto prices to drop. For instance, the China crackdown on cryptocurrency exchanges in 2021 caused Bitcoin's price to fall from approximately $63,000 to around $30,000 within a few weeks, highlighting the profound effect of bad news.?

This phenomenon is known as the “negativity effect,” and it is particularly evident in Bitcoin, where negative news has a stronger impact on price movements than positive news.?

Furthermore, positive news increases market liquidity, as uninformed traders often jump in, driven by fear of missing out (FOMO). In contrast, negative news decreases liquidity by making both informed and uninformed traders hesitant to trade.