Let us just start by saying that the crypto market is an independent area with tax-free virtual tokens, where anarchy reigns. It means, simply put, that the crypto market is not regulated by any law, which allows it to make its own rules in the game. By the way, understanding the factors under which a cryptocurrency price is constantly changing will be very useful for looking for the best coin to invest in.
For example, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups.
So let’s try to find out what determines the price of Bitcoin. Today we will talk about supply and demand, which affects the price of everything which you can buy or sell, cryptocurrency emission, liquidity, bitcoin interaction with altcoins, and more.
When discussing influence on the price of everything, which can be bought and sold, the supply and demand impact has ground everywhere. Let’s consider two possible cases on the example:
What does it mean? According to the extraordinarily high demand for Bitcoin now, its value will definitely rise. Do you know that there is a limited amount of Bitcoins? Bitcoin has a maximum emission – 21 million tokens, with the final coins being mined in around 2140.
Bitcoin price changes can also be affected by the number of tokens in circulation, caused by large bitcoin transfers from/to cryptocurrency exchange platforms.
Let’s get down to mining if you didn’t know how bitcoin and other cryptocurrencies were produced. Cryptocurrency mining is when transactions between users are verified and added to the blockchain public ledger.
Halving provides a reduction of a reward for crypto miners, divided in two. To be exact, it is a feature provided at the systemic level per 210 000 blocks.
Halving is needed to prevent inflation by controlling the emission of cryptocurrency.
Liquidity is the ability for currency trading without causing tangible changes in its prices. There are two types of liquidity – liquidity of assets and liquidity of the market.
An asset can be called liquid if it can be easily converted to cash. The market also can be called liquid only if there is a high currency trading activity.
If liquidity is low overall, the order book will be less stacked. So, remember that if liquidity is down, the costs will be changing.
There is no way you could not have seen the hype around cryptocurrency, which probably inspired you to start trading. People learn about cryptocurrencies from TV, news, and social media and treat them like making easy money. As you know, a price has tended to rise when a lot of people start investing.
For example, only one tweet from Elon Musk changed the DOGE coin price by 20 percent of its value when people believed the hype and started investing.
On the other hand, if a token or an exchange gains a bad reputation in the media, it can prompt traders to cash out before the price plummets, and they lose more money.
There has been competition between Bitcoin and altcoins in the cryptocurrency trading world, where each wants to rise. Even though Bitcoin is a leading coin both in price and in capitalization, its technology is considered to be long-standing.
If bitcoin goes up, the altcoins will also go up.
In recent years everything changed. Crypto is no more an unknown currency with a questionable future, and now it is the most profitable asset for trading, in which immense foundations trust.
Due to the large size of a whale trader’s position, whale traders can influence markets to move in either direction when they make large buy or sell orders. Whales can lead to huge changes in the price of Bitcoin.
According to the high volatility of the cryptocurrency market, you should establish a proper risk management strategy, including:
Never go all-in, especially when a token is high when the token is volatile to prevent unexpected and unpleasant losses. Check out cryptocurrency news and stay aware and updated.
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