What contributes to variations in Cryptocurrencies?

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Hi everyone! I think a lot of crypto users are interested over time to see what makes cryptocurrencies go up or down. Therefore, I have also decided to get more informed about it. For financial professionals, this one might seem an easy one to digest, but for common users, it might need more reflection. So, let’s see together some main interfering factors in cryptocurrency variation.

Besides the technology behind cryptocurrencies and the risk of being hacked, several aspects might contribute to variations in Cryptocurrencies:

Increasing demand The supply and the demand are important factors for products, including cryptocurrencies in the market. The raised use of crypto coins made them popular and more and more companies, governments, and countries are interested in adopting them. Therefore, their value rises. Buying crypto converts the digital coins rising the price whereas selling crypto determines the price to go down. The fall of Bitcoin has much time lead to an adjustment of the other cryptos on the market.

Production Cost The costs of a coin production are related to the mining of that coin, the cost of manufacturing of special technology (hardware, cooling systems, servers, etc.), the electricity costs – all of these adding value to that coin. For example, Bitcoin requires great resources of production, and therefore, its value is higher compared to other cryptocurrencies.

Mass adoption When cryptocurrencies are adopted at such a large scale, their value can go up to the top. That means using crypto in real-life situations by being accepted as a method of payment.

Regulation Once a coin has reached a majority of people (e.g. mass adoption), the governments might add regulation of the coin and the cryptocurrency can become more centralized. This could affect its price.

Node number Node number measures the number of active wallets on the network that can be found on the internet or weblink of a currency. This way we can observe how strong a cryptocurrency is supported by a community and if it is or not overbought.

Fiat inflation When the fiat for a coin falls, for example, the price of Bitcoin will rise for that coin. So, you can get more of that crypto with your Bitcoins.

Hope my post made things a little more clear for those of you that needed to have a deeper understanding of this topic.

Best!



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