The real mechanism behind the sudden surge of cryptocurrencies — the process behind price increases

The dramatic price fluctuations witnessed in the cryptocurrency world are not merely products of market psychology. Behind the multiple forces that cause cryptocurrencies to jump several times or even dozens of times in value, several dynamics are at play simultaneously. This time, let’s delve into the essence of why such explosive rises occur.

The “Spark” Created by Speculative Psychology and SNS Effects

The power of social media is greater than imagined. Just one influential account on Twitter making a post can quickly reach millions of eyes. The speed at which this information spreads becomes the first stage in rapidly pushing up cryptocurrency prices.

There is much to learn from the case of Dogecoin. Starting as a joke coin, this project gained market attention after being mentioned by certain prominent figures. Investors, driven by FOMO (Fear of Missing Out), rushed to build positions, fearing they would be left behind.

What happens during this process is simple. When demand overwhelms supply, prices increase exponentially.

Liquidity Explosion Triggered by Listing on Major Exchanges

When an obscure project gets listed on a major exchange, the game changes. Because millions of users gain direct access through the listing.

Let’s look at the example of Shiba Inu (Shib). Within just a few days of being available on a major trading platform, its price surged by hundreds of percent. This is not mere coincidence but the result of a rapid increase in liquidity combined with buying pressure from new entrants.

The fact of being listed itself is recognized as a “mark of credibility,” creating a virtuous cycle that attracts new investors.

Innovation Announcements and “Whale” Strategic Actions

Innovative announcements from projects are also key triggers for price increases. Announcements such as the addition of smart contract functions, partnerships with large corporations, or major blockchain upgrades (hard forks) dramatically change market participants’ expectations.

Ethereum is a typical example. Its price has shown significant fluctuations with each network upgrade.

On the other hand, more implicit forces can also work. Sometimes, large holders (“whales”) intentionally drive prices up. They gradually buy in to attract small investors, then sell at the peak to lock in profits. This process can cause major market upheavals.

“Herd Effect” During Bullish Market Phases

During bullish markets (bull runs), even weak projects can see their prices soar. The overall market sentiment temporarily surpasses the intrinsic value of individual assets.

In the major Bitcoin rally of 2021, thousands of tokens experienced dramatic increases. Even low-quality projects benefited because overall capital inflow was prioritized, and individual evaluations were deferred.

Skills to Spot Signs of Price Rise

In actual investment decisions, it is crucial to understand what is happening in advance.

Monitor trading volume changes: Especially when trading volume suddenly spikes without clear reasons, it could indicate whale activity or systematic buying.

Interest on social media: If a coin rapidly becomes a trending topic, it can be a reliable upward signal. However, it is important to judge whether the discussion is just a transient boom.

Quality of news sources: Tracking news that actually moves the market, such as partnership announcements, new listings on major exchanges, or achievement of technical milestones, is essential.

Chart pattern analysis: Using technical analysis tools to identify potential upward zones is also an effective method.

Finally: What Comes After Explosive Rises

The phenomenon of cryptocurrencies soaring is the result of a complex interplay of market psychology, media coverage, and actions by major players. However, always remember that after a short-term explosive rise, a similar or even greater sharp decline often follows.

In investment decisions, it is important to stay calm and avoid investing beyond your acceptable loss amount. Maintaining a risk management approach without getting caught up in market excitement is key to long-term wealth building.