Recently, a large number of new users have entered cryptocurrency platforms and they represent more than 25% of users. This increase had major effects on the market, whether negative or positive. It also increased the effects of whales who can manipulate and influence prices, which could lead to losses for new investors.
Negative effects
Increased sharp price volatility
When a large number of new people enter the market, it increases the demand for cryptocurrencies and this can cause sudden price increases. But since most of them are still beginners, there can be strong price fluctuations. For example, small coins like Shiba Inu and Dogecoin, you can see them rise quickly, and then find them suddenly fall due to large sales by people who entered the market without understanding. The market is in a state of great volatility.
Increase in random sales
New investors can react emotionally to the market. If there is a sudden drop in prices, they may sell quickly and without thinking, which causes the market to collapse even more. This creates panic among traders and increases the sharp decline in prices.
Inflation risk in currencies
Increased demand from new people can cause a price bubble, especially in small cryptocurrencies that are not well-known. Whales, who are big investors, can artificially raise prices to create an unnatural rise, and then sell huge quantities, which leads to a rapid collapse in prices and makes new people lose their money.
Positive effects on the market and prices
Increased demand for cryptocurrencies
When new investors enter the market, the demand for cryptocurrencies increases, which leads to higher prices, especially for large currencies such as Bitcoin and Ethereum. This means that the market becomes more attractive and trust in it increases, which stimulates more investments.
Increase liquidity in the market
When new traders enter the market, there is more liquidity, meaning transactions are completed faster and easier. This liquidity makes the market more stable in the long run, which increases confidence in the market as a whole.
Raising awareness and institutional investment
With the increase in the number of new investors, the market is starting to attract the attention of large financial institutions, which increases confidence in cryptocurrencies in general. Large companies may also start investing in these currencies, which will help stabilize prices in the long term.
The impact of whales on the market and the manipulation of newcomers
With the increase in the number of new investors, the market has become more vulnerable to manipulation by “whales” (the big players in the market who have huge amounts of currencies). These whales have a great ability to influence currency prices.
Minor currency price manipulation
Whales may buy huge amounts of coins like Shiba Inu to suddenly drive up its price. Then, new investors who don’t understand the market well may be tempted to buy the coin, and then whales sell huge amounts, which leads to a sudden drop in the price and new investors lose their money.
Exploiting feelings of greed and fear
Whales know how to exploit the feelings of greed and fear among new people. They use rumors or fake news on social media to encourage new people to buy certain coins, especially if the prices have suddenly risen. Then, the whales start selling huge amounts of these coins, which leads to a sudden drop in the price and makes new people lose their money.
