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Cryptocurrency or Bitcoins are blockchain-based digital currency. Presently, the decentralized model which completes your transaction without any intermediary, cryptographic techniques which secure your verified transactions or blocks and distributed ledger technology which can maintain the transparency in a network, are few of the features of digital currency which are captivating the attention of investors, traders and developers also. What is the intrinsic value of cryptocurrency? It has become the fastest-growing investment asset that can help you in earning massive profits. Like any other asset, the price fluctuation of cryptocurrency depends on multiple factors. What drives the price of cryptocurrencies? In this article, let us try to find out a few of the major factors which can shake the value of cryptocurrency.
Major Factors Affecting The Value Of Cryptocurrency
Cryptocurrency is a relatively new asset for investment as compared to traditional stock markets. But like the traditional markets, it experiences the fluctuations in value of cryptocurrency when one or other factors associated with respective currency changes even for the short term. What affects Bitcoin value? Let us list out some of the major factors which influence the price of digital currency:
Supply and Demand Of Crypto coins
Like traditional currency or any other investment asset, the price of cryptocurrency follows the basic principle or market law of Price-Demand in the crypto space. When the demand for a particular crypto coin increases, the price will automatically rise and when the demand for a particular crypto coin decreases, the price will tend to fall. As the crypto marketplace is highly volatile (10% rise and fall of the price is normal) in nature, you can notice the rapid ups and downs. Taking the help of crypto charts, trend history, various trading tools, and many more, technical analysis is done to invest in cryptocurrency invest in cryptocurrency.
Particular participants connected to the network are constantly involved in mining the limited coins available in the crypto space. Not physically, but by solving the complex mathematical algorithm associated with any transaction involving the particular cryptocurrency, on their connected system, validating and updating the verified transaction as a block in a blockchain network. When the systems are not upgraded, power consumption is high, lack of availability of needed infrastructure, and many more factors speeds down the prices of mining, it will affect the value of cryptocurrency. Less mining, fewer coins in the market means the price rise of a particular coin takes place.
Also, every four years, when the rewards are given to miners to validate the transaction, gets halved or the event of Bitcoin Halving takes place; prices of Bitcoin get affected.
Cryptocurrency exchanges Cryptocurrency exchanges are the places or interfaces available in the form of websites and mobile apps facilitate the investors and traders to buy, sell, and trade their coins by charging them nominal transaction fees. Traders have to choose from already listed cryptocurrencies on the crypto exchanges as every crypto exchange doest not facilitate every currency available in the crypto market place. What affects cryptocurrency price? Thus, listing (Positive) and delisting(Negative) of cryptocurrencies on major crypto exchanges, are responsible for the fluctuations of the value of cryptocurrency. If a crypto exchange lists a newly launched cryptocurrency on its platform, then the community may take the reputation of exchange into account and willingly buy the coins.
Cryptocurrency is a decentralized currency that is not managed or backed by any central authority, so the regulators had to come into the picture and administer the industry. What affects cryptocurrency value? Presently, every country is regulating the currency as per their choice and requirements. Countries like Switzerland which have established its own crypto valley, have an easy regulatory environment where investors and exchanges can take advantage of the price of the cryptocurrency. While countries like the US or European Union where the crypto industry has to follows strict norms, the crypto community needs to pay higher prices for purchasing or trading cryptocurrencies. Whether there is a presence of a conducive environment or the outright ban of cryptocurrency, both the situations affect the price of the coins.
Media can break or make the prices of specific cryptocurrency. Hype of the news feeds whether real or fake created by media, manipulating or over focussing the views of the prominent personalities affecting the crypto space, continuously flashing social media posts, debates on the announcements of the government, latest partnerships press releases and many more activities curated by media(digital, social, physical) impacts the price of cryptocurrency majorly. What gives cryptocurrency value? Crypto community either panic and start selling their coins or gets overenthusiastic to buy the coins, thereby fluctuating the value of cryptocurrency. Thereby, media cannot be ignored as one of the manipulators of the prices of crypto coins.
How does cryptocurrency value increase? If the network associated with cryptocurrency successfully maintains the security of coins by saving them from various cyber-attacks, privacy by maintaining the anonymity of senders and receivers and transparency in their network, then it is likely that price of a cryptocurrency will increase due to its earned credibility in crypto space. On the other hand, if any cryptocurrency faces problems like slow transaction speed, suspicious attacks by hackers, loss of crypto coins, and even when some of the prominent members leave the team of particular cryptocurrency, the price would fall certainly as the demand of coins spike down.
Due to the unique features associated with digital virtual currency or cryptocurrency, it is not only surviving but gradually becoming popular among potential investors since 2009. Due to the highly volatile nature, the price prediction of a specific currency is a bit difficult without understanding the relative impacts of the various factors associated with price. Various charting diagrams, tools to study candlesticks charts, divergence-convergence models and other trading tools are available in the market which can help you in better price prediction and investment decisions regarding the rebalancing of your funds and diversifying the crypto portfolio. If you are a newbie, don’t get afraid of a number of factors influencing the value of cryptocurrency, but try to analyze them by studying the trends and don’t hesitate to start your investment (but with small amounts!)