Price of cryptocurrencies is extremely volatile – it could change dramatically just in a couple of hours by several hundred per-cent easily. On the one hand its high volatility allows to earn enormous amount of money but from the other it provokes significant risk.
That’s why price of cryptocurrency is one of the most discussed topics on the Internet.
Here we’ll discuss the main factors which take influence on the price of cryptocurrency.
Supply / Demand Ratio
Supply/Demand Ratio is one of the major factors which take influence on cryptocurrency price. If demand grows while supply remains constant the price of cryptocurrency goes higher. On the contrary if demand doesn’t change but supply grows at the same time the price of cryptocurrency goes lower. It should be taken into consideration that extra demand could be created by public hype – for example
Effective promotion on social nets can make some cryptocurrency extremely popular for s short period of time. On the contrary if some kind of scam has taken place recently and has been widely discussed it could take negative influence on the cryptomarket in general.
Cost of Mining
As we all know that Cryptocurrencies used to be mined. That’s why the price of mining process takes great influence on the price of cryptocurrency. There are two factors which influence the cost of mining – the cost of electricity and the difficulty of mining process. The more difficult to mine the more energy is required to mine hence, the difficulty level increases the prices of Cryptocurrencies.
Utility and Liquidity
One of the key factors which take influence on the cryptocurrencies is their liquidity and utility.
If something cannot be used or sold anywhere its price will not go too high. In such a way if the certain cryptocurrency cannot be used or sold its value will be low. And on the contrary if speaking about such cryptocurrencies as Bitcoin which can be used as a method of payment in lots of place their price will be much higher.
If you can use it to buy things and have places to spend than the price of that thing goes high. In the same way, if you can buy things with Cryptocurrencies their values go high. As we have seen in Case of Bitcoin. There are lots of places to spend it that’s why it’s price is going high day by day.
As we know in different countries cryptocurrencies are often used as a method of tax optimization. That’s why cryptocurrencies used to attract the attention of the government. In some countries cryptomarket is regulated in a rather tough way. The more strictly the certain cryptocurrency is regulated the less options one has to use it. In such a way tough regulations make the value of cryptocurrencies lower. And on the contrary if market is free and does not regulated by the government the value of cryptocurrencies goes higher.
The prices of other cryptocurrencies
It should be taken into consideration that the prices of cryptocurrencies depend upon each other. For example the price of Bitcoin goes high prices of other Cryptocurrencies go high and on the contrary if the price of Bitcoin decrease, other Cryptocurrencies also lost their values. At the same time the price of Bitcoin can also affected by other Cryptocurrencies like Ethereum.
Software and Digital Wallets
In the case of Bitcoin, software upgrade led to the creation of Bitcoin Cash, a hard fork of the original bitcoin. Such upgrades are often recommended to improve the quality of the network, especially the transaction time. For Bitcoin, it could take up 30 minutes to complete a single transaction. However, after the split, network improved and the price of the cryptocurrency shot to new highs. In such a way software upgrade could take significant influence on the price of cryptocurrencies.
Strong and safe digital wallet which is protected from hacks and easy to be used can also be a very important factor which takes a positive influence on cryptocurrency price. On the contrary in the absence of a good wallet, a cryptocurrency will attract fewer investors and its price will be lower.
Exchange listing can take great influence on cryptocurrency price.
If a cryptocurrency is listed on an exchange platform it makes it easy to many people to purchase it or to sell it. Using special User interface created by exchange platforms even non-technical person can make all the crypto transaction which he wants.
That’s why at the moment when a cryptocurrency gains access to one of the main exchange platforms, as a rule its price skyrockets.
Therefore, when a large exchange platform such as Coinbase, Bitfinex, or Bittrex announces that they are going to list a cryptocurrency that you trade, the price will obviously shift. This could provide the boost you’ve been looking for.
As a conclusion
Cryptocurrency market is extremely volatile. It can make you really rich but it causes enormous risks at the same time. So to make one’s mind about the certain actions with the certain cryptocurrency one should take into consideration the whole range of factors which can take influence on its price.