Analysts and market participants aren’t yet able to create the price prediction formula for cryptocurrencies; the market forces are divided on how these new assets will perform– some are calling for steady price growth, and others are seeing the price to fall to zero. Meanwhile, the idea of correlating cryptocurrencies with Giffen goods seems to be undoubtedly true.

Why Are Cryptocurrencies like Giffen Goods?

Giffen goods are products that people consume more when prices are higher, contrary to the demand and supply principle. Cryptocurrencies drive higher demand and interest when its price increases while the demand for digital currencies declines with the decay in prices.

The demand for cryptocurrencies increased substantially in the final two months of last year when its price was soaring at a robust pace. However, regulators interference and harsh comments from market forces pulled back Bitcoin (available on Coinbase) (BTC) and other digital currencies from their all-time high; the decline in prices has also lowered trader’s interest towards cryptocurrencies.

Market Interest for Cryptocurrencies Declined

Google trends show that searches for Bitcoin (available on Coinbase) and other cryptocurrencies tanked by 80% to the lowest level in the last five months, while total confirm transactions are declining at a sTron (available on Binance)g pace over the previous two months.

Traders lost their confidence in cryptocurrencies after regulators, and key market players sTron (available on Binance)gly criticized them on various grounds, including the lack of underlying value, failure to work as a medium of exchange and its uses in illegal activities.

Followed by Facebook and Google, Twitter has also been planning to ban cryptocurrency related ads; they believe the unregulated cryptocurrency ads are harmful to consumers.