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What Factors Affect Cryptocurrency Price?

Cryptocurrencies are decentralized currencies which means they are not powered by anywhere but not really. They are built on a blockchain. There are some main factors in cryptocurrency prices that are listed below. Follow reading the article to know more about influencers on cryptocurrency price.

Supply and demand

Supply and demand makes value for everything. When demand goes up faster than supply, the price increases. It is the same for cryptocurrencies. In the crypto world for example bitcoin has a fixed maximum supply but others like Ethereum are not the same. Some cryptocurrencies ‘burn’ the amount of available tokens in the market to control the supply and demands and they try to stop inflation by burning tokens. Burn a token means send it to an unrecoverable address. On the other hand, each cryptocurrency has different monetary policies. For example, by mining each Bitcoin on its blockchain, bitcoin’s supply increases.

Cost of producing

A token is made through a process called mining. Mining means solving the mathematical problems on the blockchain in order to make a block. The reward is a coin which is given by the blockchain to the miners. The more competitive is mining a cryptocurrency like Bitcoin and Ethereum, the more difficult it is to mine. Mining needs computers, facilities like electricity, etc. All these expenses lead a cryptocurrency’s value to get higher. That’s why some cryptocurrencies are more expensive.

Cryptocurrency exchange

The most known cryptocurrencies like Bitcoin and Ethereum are trading in many exchanges. But Some smaller tokens are available in few exchanges and you cannot find them easily. It means that when a crypto is listed in more exchanges it brings more customers which means more demand and as soon as the demand for a crypto goes higher than the supply, the crypto price will increase.

Internal competitions

Since there are many cryptocurrencies out there, it is hard to join the crypto network and shine too. To make a valuable cryptocurrency it is necessary for a cryptocurrency to have an available and sufficient application. When a new useful cryptocurrency application gets its value from other less sufficient cryptocurrency applications, the second crypto needs to reduce the price to stay in the market.

Internal governance

Cryptocurrency developers make changes based on their users. For example, Ethereum is going to change its proof-of-work reward to proof-of-stack reward. For sure it will make changes on Ethereum price.

Regulations and legal requirements

It is not clear who should regulate crypto since some believe that cryptocurrency is a Securities like bonds and stocks and others believe it is a commodity just like gold and coffee. It seems that regulations are needed to clarify the cryptocurrency market and add value to it, however it may have negative effects due to changes in cryptocurrency demand.

The whales in the market

Whales play a main role in the cryptocurrency market mostly in the smaller cryptocurrencies but not in big known cryptocurrencies. good or bad it is a fact every time a whale trades its huge amount of cryptocurrency the cryptocurrency experience changes. In some cases, whales can set a cryptocurrency price.

Celebrities everywhere

Think about Elon Musk stories in 2021 and what happened to cryptocurrency. Celebrities’ support of crypto or what they say or post in social media about cryptocurrencies can affect cryptocurrency prices. You should watch out for social media.

Government’s regulation

Sometimes a government blocks some cryptocurrency based on its recognition. It may cause that crypto goes high or low. Even though it may cause another cryptocurrency price increase, it may have no effect on the crypto market too. China is an example for 2021.

Hustler and shitcoins

Like whales, hustlers cannot affect big cryptocurrencies but they use social media to advertise a shitcoin and gain more holders. When a shitcoin gains more buyers its price rises up and after that all buyers will be losers since the money’s gone and shitcoin doesn’t work.

Bottom line

Cryptocurrency market needs lots of knowledge and you need to stay up-to-date each moment since the price in this market has more fluctuations. It is important to recognize the shitcoins and if you think cryptocurrency is a good investment try to catch the market and start investing wisely.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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