Cryptocurrency prices: Explained

Elizabeth Wright
| Editor:
March 21, 2023
3 min read

The price of traditional money is made up of many factors, among them:

  • The GDP of the state that issues it.
  • Importance in world politics.
  • The economic situation.
  • The level of exports/imports and other variables.

Cryptocurrencies are decentralized and do not have an external regulator in the form of states or banking organizations, so they are subject to high volatility, and their value is primarily determined by the current level of supply and demand.

When building your income trading system, it is not enough to watch its quotes. Local maxima and minima of the price of one or another coin will not allow to predict the further price increase or decline entirely.

Cryptocurrency Price Factors:

  • News background. From time to time, there may be informational stuffing on the network. The direct goal is to push traders to sell or buy cryptocurrency. Large traders and investors, who after a sharp decline of the crypto market, globally buy them into their investment portfolio, arrange such shares.
  • Tactics and plans of large investors. It is simple for a large crypto holder to destabilize the cryptocurrency rate.
  • Technical analysis. Serious crypto players always carry out a full technical analysis (determine global trends, resistance and support zones, price corridor, the presence of graphic figures, etc.).

Long-term forecasting of cryptocurrency rates is highly dependent on fundamental analysis. It should always be taken into consideration at the stage of conducting a technical analysis of the market.

Bitcoin Price: What Does It Depend On?

Some people call cryptocurrency “digital gold”. And such a comparison is made for a reason. BTC asset is popular due to its uniqueness, as well as increased interest from consumers. The cost of the coin consists of:

  • Electricity cost.
  • Costs of mining farms.
  • Transaction fee. However, this is an imaginary cost. The main reason depends on the ratio of two variables (supply and demand).

It all depends on how strongly the interested parties agree to exchange fiat money for bitcoins. This cryptocurrency is so deeply rooted in the minds of investors that they are confident in the growth of the digital asset in the future due to the next reasons:

  • Cryptocurrency has no emissions, so Bitcoin cannot exceed the number of active coins or depreciate.
  • The mining of digital gold is getting more and more difficult.
  • Agiotage mixed with human factors.

As a result, a kind of vicious circle is formed. Conflicting rumors with various scandals continuously heat the supply-demand ratio. As a result, as soon as the BTC price falls, there are those people who purchase it at more favorable rates.

How Is the Exchange Rate Formed?

A smooth increase and decrease in the cryptocurrency rate indicates a regular flow of trading. Sharp changes in the price suggest that a whale entered the exchange.

The whale is an exchange player with a considerable investment asset capable of raising the value of the currency to the maximum as soon as possible.

Thus, whales deliberately “pump up” the cryptocurrency rate and make money on it. Young traders can easily panic; they can not even distinguish the dump from the correction. As a rule, if there are lots of orders on exchanges, and the correction is not observed, there will most likely be a depreciation.

Very often, the bad news and the collapse of the digital currency take place simultaneously. The pre-launched info-hearing creates a stir and panic on the exchange.

Correction is an insignificant change in the value of cryptocurrency in a direction opposite to the current trend. On the crypto market correction can reach 50% of the value of the asset.

Is It Possible to Predict the Rate of Cryptocurrency?

If one wants to become an experienced investor, they need to be prepared to devote enough time to studying this topic. Now it is not so important to have massive investments to build a huge high-tech mining farm.

The tracking of news, current trends, forecasts of various experts play a more significant role. Be sure to learn the basics of technical and fundamental analysis and combine them between failures before buying or selling cryptocurrency. It is also essential to analyze how strongly the rise/fall in the price of the cryptocurrency has affected. It is vital to learn how to make risky decisions and open deals in time.

The Bottom Line

If you do not have enough assets, it is complicated to identify the growth or depreciation of the cryptocurrency. If you carefully monitor the events on the exchange and analyze the process, you will be able to avoid significant losses from your wallet. In some situations, it is necessary to sell and lose small amounts to save capital.

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