How Cryptocurrency Prices Work
In fact, the price of Bitcoin is determined by the supply and demand for it. This market law is primary here and is executed at 100%. The more attention to the cryptocurrency market, the more actively the same Bitcoin as an asset or payment unit is distributed, the higher its price.
Digital currencies are as mobile as they are opaque. No one knows for sure what the total number of bitcoins or their analogs in the market is, or who exactly they belong to. This is important because, in such conditions, concerted actions of several large holders of such an asset (pampers) are enough to reverse the market trend. For a high risk, the owners of virtual currency have the opportunity of large-scale earnings – in case the market moves in the “right” direction.
Impact of population literacy
There are also secondary factors affecting the formation of the price of the virtual currency. For example, the growth of financial literacy of people and open access to information about events occurring in the market of cryptocurrency. The more attention to digital assets, the greater the demand for bitcoin and other currencies, the higher their prices. Improvements in infrastructure related to the cryptocurrency market, such as expanding account replenishment methods, transaction paths, options for converting funds and other options, have a positive effect on the growth of interest in it from investors. The simpler the “in and out” is, the better.
Inflation affects indirectly
If you look deeper, another driver appears that affects the rate of the virtual currency, but indirectly, not directly. These are indicators of inflation in real life. Rates of Bitcoin, Altcoin, and others depend on the issue of money, that is, the number of coins already released into circulation and ready for use. This resource is finite because the source code allows you to produce a predetermined amount of bitcoins. But to inflation, Bitcoin does not have any binding (because it is not secured by anything, again). In this light, investments in cryptocurrency are presented to investors more and more attractive.
Less significant factors of influence can be many. This policy, the number of active buyers and sellers, the amount of money in cryptocurrency, the mood of speculators and so on. The influence of the political factor can be easily tracked by bitcoin pairs with currencies of emerging economies – for example, with the Russian ruble.
About speculative players should be said separately. The virtual currency market is only developing, its volume is growing constantly, but intraday indicators still allow the artificial formation of a growing or downtrend. As it was said earlier, several large holders of cryptocurrencies may well “collapse” prices or direct the market into an up-trend.
Panic and hypertrends
The mood is another driver that determines cryptocurrency prices. “Market Panic” can both “bring down the course” and raise it “to the skies”. It all depends on the cause of market reactions at one time or another. If investors are positive and ready to buy, prices will rise.
In any case, when investing in cryptocurrency, it is worth remembering that a successful history of price increases in the past does not guarantee a repeat of this situation in the future. Risks will increase over time as the cryptocurrency market becomes more volatile.