Messari's tech lead and analyst Tulip King shared insights into what drives the cryptocurrency market, noting its current state and potential for growth and decline.
Factors Driving the Crypto Market Up
The crypto market rises when new money enters, with the 'wealth effect' happening through innovation such as airdrops. Examples like Uniswap's airdrop in September 2020, distributing 400 UNI tokens to over 250,000 addresses, catalyzed DeFi growth, while Jito's December 2023 airdrop increased Solana's blockchain activity.
Reasons for the Crypto Market Downturn
The market declines with fund outflows when investors seek profits or liquidations occur. Schemes like Bankless Ventures deplete market liquidity, and celebrity token projects result in concentrated profit extraction. Denial psychology and leveraging increase market fragility, making it prone to liquidations.
Future of the Crypto Market
According to Messari's analyst, the market may be experiencing a healthy yet painful cleansing. Predictions remain optimistic with stronger regulations and a more mature ecosystem amidst growing global adoption at the beginning of 2025.
The cryptocurrency market is influenced by various factors driving its movements. Its current state might form a basis for further growth if sustainable development and regulatory measures continue.
