What Affects the Price of Cryptocurrencies?
In this post of our blog, we will talk about 5 important factors that affect cryptocurrency prices. Anyone who wants to be interested in crypto money often has questions about which crypto money to invest in this year. In this respect, cryptocurrencies that experience many price fluctuations during the year We have compiled 5 factors that are important in influencing prices.
Supply and Demand
The balance of supply and demand is one of the most important factors affecting the price of cryptocurrencies as in all financial assets. Because the price of an asset is determined by how much it holds and how much demand it receives. Cryptocurrencies are the same way. An example of this in the cryptocurrency industry is Ripple. The current supply of XRP is about 45 billion, which has caused XRP prices to not reach the 3 USD levels again as seen in 2018.
Mining
The other factor affecting prices in the crypto money sector is mining. The degree of difficulty of mining a cryptocurrency can significantly affect prices. When we take Bitcoin as an example, we see that BTC mining starts to rise in prices when the difficulty level goes up.
Political and Legal Situations
Since the crypto money sector is decentralized and not controlled by any authority, it is a sector that many countries are approaching with suspicion and concern. Therefore, countries want this area of financial freedom not to be a tool for malicious uses and impose various regulations accordingly. These regulations directly affect the use of crypto money for a certain region and this is reflected in prices. The desire to control this decentralized sector by an authority too much may reflect negatively on prices, as well as the introduction of good regulation may increase the adoption of crypto money use and have a positive effect on prices.
Availability
Each cryptocurrency released has a specific project. However, if this project does not serve a specific purpose, does not make people’s lives easier and cannot offer usability, this may also reflect negatively on prices. As an example, Ethereum’s project was to provide an infrastructure where developers could develop their own decentralized applications. Ethereum, which offers a correct approach to this goal and continues the development of the project with a good team, is currently hosting many tokens and many projects. This has reflected very positively on Ethereum prices over time.
News & Media
Positive or negative news is another of the most important factors affecting the market. To illustrate this with an example, the announcement that a cryptocurrency has been hacked will cause people to fear losing all their money, and this will create a selling pressure in the cryptocurrency and negatively affect prices. On the other hand, the signing of an important business partnership of a crypto money or the announcement of significant developments in its infrastructure will increase people’s faith and confidence in this project, creating a positive atmosphere on this crypto currency and triggering the rise in prices.
