Eli5:Why does cryptcurrency vary due to non financial events-and are they separate from banks and their changes?

113 views

Eli5:Why does cryptcurrency vary due to non financial events-and are they separate from banks and their changes?

In: 1

Cryptocurrency traders are just people, and people tend to trade based on real-life events, which aren’t necessarily just events happening on the markets.

I don’t really understand the second question.

The security and reliability of cryptocurrencies are designed to be separate from the traditional financial system (like banks) but as long as there are players in both markets they can impact one another. When inflation goes up the fed will often increase there rate, which will increase the returns on bonds. People will see these better returns and decide they want some of that, so they sell off other assets to buy up some bonds. If anyone decides to sell crypto to buy bonds then the crypto market is impacted by inflation. There are other ways the two can impact one another but it will always come back to how changes in one market effect the decisions made by players in both markets.