cryptocurrencies, such as Bitcoin, are assets with high volatility and prices that change quite quickly compared to other investment vehicles.
9 months after the first bitcoin appeared with the Genesis Block, the New Liberty Standard (NLS) site set up a system where bitcoin could be bought and sold, and set a rate on the cost of electricity spent on bitcoin mining, according to which 1 USD was equal to 1309.03 BTC. In other words, the first USD/BTC exchange rate was realized with a value of 0.0008 and thus Bitcoin gained its first price.
We will list the factors affecting the price change of bitcoin and approximately 2600 altcoins, which started with 0.0008 USD and increased its value millions of times in a short period of about 10 years.
1. Supply and Demand
The relationship between supply and demand is one of the factors affecting the price change in the crypto money market as in all other investment instruments.
Many cryptocurrencies have a limited supply. Increased demand versus limited supply in a particular cryptocurrency leads to an increase in the price of that cryptocurrency. In the opposite case, where the supply is high and the demand is low, the price of the relevant crypto money decreases.
As with any investment instrument, the impact of regulators in the crypto money market is great. Almost every country periodically comes out with various news about what can be done to crypto coins in legal matters. Whether cryptocurrencies should be recognized as a currency or just considered assets, banned entirely, or tightly regulated, are frequently occurring in many countries
The impact of regulations on cryptocurrency prices can be observed instantly. For example; In April 2017, when Japan announced that it would legalize bitcoin, the bitcoin price increased by 30% in one day to 1130 USD. In February 2018, China’s blocking of websites related to crypto coins led to a 15% loss in bitcoin and a 20% loss in ethereum. In addition, the steps taken by the Securities and Exchange Commission (SEC) in the US on crypto coins concern all investors investing in this field worldwide.
3. Current Events
Although current developments seem to be unrelated to crypto coins, they can affect prices.
If investors’ trust in a fiat currency is lost for political or economic reasons, it is quite possible that they will turn to cryptocurrencies, which can lead to an increase in prices. Some experts think that if the political and economic atmosphere worsens around the world, the interest in gold, which is seen as a safe haven, may turn to crypto coins.
Speculative investors expect to profit by quickly buying and selling cryptocurrencies, which can cause short-term fluctuations in the market. In particular, speculative trades carried out by so-called “
” investors who hold a very large amount of a cryptocurrency can have a huge impact on the market.
5. New Cryptocurrencies
In the crypto money market, quite a lot of altcoins have been produced in recent years and continue to be produced. The number of cryptocurrencies in the market has exceeded approximately 2600, and each new ICO causes divisions in the market. As money flows from one cryptocurrency to another, prices are naturally affected.
It is very important for investors to examine new crypto coins in depth before investing and to act accordingly in order to avoid major losses.