As an alternative to traditional banking, the decentralized and borderless nature has made cryptocurrency a global phenomenon. A cryptocurrency’s fluctuating price can have a major impact on its value. This article discusses the factors that determine cryptocurrency prices, and how they can be understood.
Supply and Demand
This is a basic economic concept that can be applied to the price of cryptocurrency. If the demand for one cryptocurrency is increasing, its price increases. Conversely, if it decreases, prices fall. Price goes up when demand increases and price drops when demand decreases.
The sentiment of the cryptocurrency market is also a factor in determining its price. Market sentiment is a term used to describe the attitudes of investors and traders toward a cryptocurrency or towards the market in general. Positive emotions can boost prices and negative emotions can drop them.
Recent News and Event
A significant effect can be had on prices by news or events. Positive news (such as announcing new features or announcing new partnerships) can drive up prices. Price drops can be caused by negative news like hacking or government crackdowns.
Because the crypto markets are so unregulated, it is easy for them to be manipulated. Whales — individuals or companies with a large amount of cryptocurrency — can manipulate prices by using this holding. Buy large quantities to boost the value of the cryptocurrency. Sell it for a good profit and the price will drop.
Cryptocurrencies’ volatility is known, as their prices are often volatile and fluctuate dramatically. The volatility of cryptocurrency can make it exciting for those looking to trade and profit. But, investors in search of a secure investment may find this a concern.