The price of cryptocurrency, and also of all assets in general, can be affected by various factors. Whether prices rise or fall generally depends on supply and demand.
That said, there are also other forces that have a real influence on token price. To better understand this, it is necessary to find out a few of these factors that affect the crypto market.
Supply and demand
Supply and demand is a crucial principle in the financial industry, especially in crypto investing. This is a fairly simple factor to monitor; a factor that affects everything you trade (be it stocks, currencies or crypto).
If something is missing, its value will increase; if there is an abundance of something, the value is likely to decrease. It’s no secret that the effect of supply and demand on inflation and deflation is significant. The higher the demand and the lower the supply, the higher the price of a crypto.
Here it should be noted that unlike fiat currencies, many cryptos have a limited supply. Therefore, many argue that scarcity is a major force in the crypto market. When it comes to scarcity, mining is also important because if a cryptocurrency has a limited supply, that will also affect its supply and demand.
And let’s not forget the halving process. Cryptocurrencies can experience a halving, i.e. when a cryptocurrency reaches a certain number of blocks (or the time that has elapsed) and thereafter the block reward for each block is reduced. Although there are different factors that affect supply and demand, crypto traders should look at volume because volume often precedes price movements.
The various code updates
One of the major factors that affect the price of cryptocurrency is code updates. Why? Well, cryptocurrencies are constantly changing with new items being added frequently. Usually, code updates are added to improve the performance of the cryptocurrency and boost the adoption of decentralized finance globally.
For example, Bitcoin’s update to add the Lightning Network is a huge change, as is Ethereum’s move from a proof-of-work algorithm to a proof-of-stake. Note that announcements can also affect the price of a cryptocurrency, but what matters most is when those changes are finally implemented and usable.
If announced changes are not possible or do not work, investors may lose confidence in the project. Keep in mind that if code updates were already expected, they might not affect the price of an asset. We are all anticipating the launch of Ethereum 2.0 with its proof-of-stake algorithm, wondering how it will affect Ethereum prices. Bitcoin, and in a broader sense, crypto currencies, have radically transformed the financial sector.
This technology offers investors access to digital money, fast cross-border transactions and decentralized governance. Traditional currencies seem outdated in the face of such success. The success of cryptocurrencies is such that more and more investors are turning to these investments. This has exploded the creation of exchange platforms such as BitIQ official site. These different sites offer enormous financial possibilities to investors across the 4 corners of the world.