How Cryptocurrency Prices Move Up and Down

Goldman Sachs stated that the movement of cryptocurrencies is linked to several economic factors that do not make them a hedge currency or an investment diversification tool, contrary to current popular belief. A report issued by the investment bank noted that cryptocurrencies rise when inflation increases and fall as interest rates and the dollar strengthen. The report concluded that this correlation undermines the prevailing idea that increased adoption of cryptocurrencies could lead to higher prices; as demand for these currencies increases, their movement will follow the path of other assets, which does not make them a hedge against fluctuations in other assets in general. The recent rise of the dollar, attributed to the Federal Reserve's intention to raise interest rates, led to a drop in the market value of cryptocurrencies to about $1.76 trillion, down from more than $3 trillion at the peak recorded in November.