Where does all the money go when the value of stocks, houses, and cryptocurrencies plummets?
At the moment the online markets around the world are struggling, as the world is nearing a recession. This, of course, causes changes in the market prices. Nowadays one of the most affected marketplace which shows a decrease in value is the crypto market. It has lost billions of dollars in one month. All of these started when the Terra Luna token, one of the most prominent coins in the industry, lost its value – investors started to panic, which resulted in the crypto market crash. Investors sold their digital assets because of the fear of losing all of their funds.
In the case of stocks, the situation isn’t attractive as well – the prices continue to decrease at a huge rate. The most affected stocks in the industry are tech stocks, which are suffering the most. So, when the prices of the assets like stocks and cryptos go down, where does all that money go?
What exactly happens?
Not only are crypto prices in rapid decline – the main index of the Toronto Stock Exchange was down almost 3%, the S&P 500 was down nearly 4%, and the NASDAQ was down nearly 5%. Money isn’t going away; rather, what’s being lost is the perceived worth of things. Stocks, homes, and bitcoins are all still out there, but they’re worth less than they were a year ago. Losses incurred by an investor as a result of a stock decline are not transferred to another party.
First-time market participants are likely to have heard the adage that for every buyer there is a seller. Because of this, some may think there are a lot of sellers draining the money from the markets as they fall, and making a fortune in doing so. In order to avoid losing money from the crypto market price fluctuations in a very short period of time, investors started to adopt Bitcoin Method, and other AI-generated tools, that make their trading process safer. In addition to that, with the use of this tool investors can get the most out of their trading process with the help of the market’s analyzing feature of the bot. AI-generated tools also allow investors to set up stop-loss orders, which safeguards their funds.
Markets are valued according to how much product is sold. So, we say “bitcoins are worth $60,000” if the previous bitcoin deal was $60,000 or more.
Even if we didn’t purchase and sell our actual bitcoin, stocks, or houses, the notional value of such non traded assets may grow or decrease without our involvement. To put it another way, the price of all homes would drop if everyone sought to sell at the same time to get their money out.
It’s not uncommon for markets to make a partial recovery the next day after a steep loss. Fears of more interest rate increases arose recently among traders in response to Friday’s surprisingly high US inflation rate – 8.6 percent.
Bear in mind
If you want to enter the market, there are many things to keep in mind. Firstly, it should be stated that the money that decreases in terms of the stock and crypto prices, does not go anywhere. The main thing about it is that when money (both fiat and digital) loses its value, the price of the assets changes as well. The global and financial markets are based on the law of supply and demand. Let’s discuss this theory in the case of the stock and crypto markets.
What caused the crypto crash? The true answer lies in the supply and demand law. When investors started to sell their Terra Luna tokens the supply increased dramatically in the marketplace compared to the demand. For this reason, the price of the token has decreased, considering that the number of people who wanted to acquire the currency dropped significantly. What made so many investors sell their tokens? The truth is that one of the investors who was holding too many BTCs withdrew his investments, which artificially made the major coin decrease in value.
In the case of stocks, this scenario was almost the same. Stocks started to decrease in value because of the escalating inflation rate. As a result, many investors, similar to crypto traders, started to panic about their assets, and started to sell them until they were priced relatively higher. After that, many stocks dropped in value. Apart from this, the effect of the Russia-Ukraine war is significant on the financial markets, especially on the stock and commodity markets. As a result, nowadays many countries are at the risk of increased inflation, which makes investors too afraid of investing their money in assets. What the future holds it’s unknown. However, the fact is that the online markets nowadays are struggling and the rebound tendencies don’t seem heartening.