The first thing you should know about cryptocurrency is that it’s volatile. Cryptocurrency values can fluctuate wildly from day to day, and even from hour to hour. What makes the price of crypto go up or down?
Cryptocurrency is a new kind of money. It’s digital, and it’s not issued by governments or central banks like the dollar and euro are. Instead, it’s created and controlled by a network of computers all around the world, which work together to solve complex mathematical problems.
What Makes The Price Of Crypto Go Up?
Cryptocurrencies can fluctuate widely in prices and are, therefore, not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. Past performance does not guarantee future results. Any trading history presented is less than 5 years old unless otherwise stated and may not suffice as a basis for investment decisions. Your capital is at risk.
Crypto volatility is the price movement of a cryptocurrency over a certain period of time. It’s a measurement used by traders that indicates the degree of risk associated with holding a specific asset over a defined period of time. Volatility also helps traders determine their entry and exit points into a trade or investment position.
But what makes the price of crypto go up or down? There are many reasons, but today we’re going to focus on the main ones:
1) News events
2) Supply and demand of coins
3) Technology updates
4) Competition from other coins
5) Regulation updates
1. News Events
When you’re starting out in the world of cryptocurrency, it’s easy to think that price movements are random. But there are reasons behind market behavior that can be explained by fundamentals. There are a number of ways to track them, but one simple metric to use is “news events.”
When something big happens in the world of cryptocurrencies, it causes a ripple effect that affects prices across the board. The more people who hear about it, the higher their expectations for price increases, and vice versa.
The latest event was the launch of bitcoin futures trading on Cboe and CME. This meant that investors could now speculate on whether or not the price of bitcoin would go up or down. Bitcoin futures trading has been around for a while, but this is the first time it’s been available on a major exchange. This has introduced millions of new investors who didn’t understand how to buy bitcoin futures without turning over every last penny to an exchange.
In addition to launching bitcoin futures trading, these exchanges also launched bitcoin derivatives — contracts that give you exposure to both bitcoins and dollars based on the underlying price of bitcoin.
2. Supply and demand of coins
The supply and demand of a coin are what drives the price. If there are more people buying a coin than selling it, the price will increase. If there are more people selling a coin than buying it, the price will decrease. You can see this happening on an exchange, when the buy orders have more volume than the sell orders, prices will go up. When the sell orders have more volume than the buy orders, prices will go down.
If you think that a coin’s value will increase in the long run, then you should buy at cheap prices and sell at high prices. If you think that a coin’s value will decrease in the long run, then you should sell it at high prices and buy it back later when it’s cheap again.
3. Technology updates
Developing projects like Bitcoin and Ethereum is under constant development and have regular updates scheduled for the future. These updates tend to add new features to make their currency more useful and appealing such as faster transaction speeds, lower fees, or improvements to security. All of these things are likely to affect its price.
In addition, some companies also update their existing technology with new features that expand upon their current capabilities. For example, Litecoin has recently started experimenting with SegWit which can make transactions faster and cheaper than Bitcoin could manage at this point in time. This has helped increase demand for Litecoin which in turn has pushed up its price.
4) Competition from other coins
As a general rule, when a coin becomes more useful, it will tend to increase in value. For example, if the developers of Bitcoin were to create a new feature that allowed Bitcoin users to send money to each other much faster than they can now, that would be a good reason for people to want to own more Bitcoin.
However, it isn’t only Bitcoin that can add new features; other cryptocurrencies can do the same thing. If one of them were to add a superior feature first, then people would start using that coin instead of Bitcoin, and so the value of Bitcoin would fall: In order for Bitcoin to grow in value, it needs to compete with other cryptocurrencies. That’s why we say that its price is dependent on competition.
5) Regulation updates
When people talk about the price of Bitcoin, they are referring to the current price at which Bitcoin is changing hands. Since Bitcoin is a purely speculative asset, this price is determined by how little sellers are willing to charge and how much buyers are willing to pay. Even then, the price of Bitcoin can vary across exchanges like Coinbase and Binance or currencies because of market inefficiencies
The cryptocurrency market runs 24/7. There are no opening or closing times like on stock exchanges. In other words, if you want to trade cryptocurrency you need a cryptocurrency exchange, and most exchanges actually work similarly to stock exchanges.