FACTORS THAT AFFECT THE PRICE OF CRYPTOCURRENCIES
This post is a documentation of the things I have learnt about crypto. I am new in the crypto world and still learning. I will be making subsequent posts like this in the future.
Cryptocurrency is a form of payment that can be exchanged online for goods and services.
-Nerdwallet
Cryptocurrencies use a form of decentralized technology to perform their functions. Investment in cryptocurrencies is like every other investment. The riskier the investment the more you stand to gain, and vice versa.
Unlike some forms of investment we see, cryptocurrencies are rarely predictable. There is so much going on in the market, it is hard to be sure of what to expect.
I did some research on factors that influence the changes in the price of cryptocurrencies. I'd like to share some of what I found out.
SUPPLY AND DEMAND.
Like every other commodity in the market, the rate of supply and demand affects the price of cryptocurrencies.
The price can fluctuate based on the demand for a particular coin and how readily available it is. It can be seen that once a lot of people place demand for a particular coin, the price tends to go up as demand is now high.
Some currencies like Bitcoin are mostly held in storage, this, in turn, affects the supply as compared to the demand. In other words, demand is higher than supply. This will inevitably make the price of bitcoin go higher over time.
REGULATIONS
Since cryptocurrencies are decentralized forms of exchange, they can not be controlled by a particular government. However, rules in some states can affect the demand and supply of a coin which will somehow affect the market as a whole.
If the rules are flexible it could lead to an increase in price, if they are rigid it could lead to a decrease in the price of a particular cryptocurrency.
THE MEDIA
Most traders/investors rely on information from the media to determine the coins to buy/invest in. The media has also drawn more popularity to cryptocurrencies.
Information from the media can either have a positive or negative impact on the price of certain coins. Positive reviews from the media can mean an increase in price and vice versa.
So these are some of the factors that affect the price of cryptocurrencies. The thing I find most interesting about the crypto market is that it is volatile. while many might not like the volatile nature of crypto, i think it is creates opportunity for many to make gains unheard of in other markets
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