Cryptocurrencies are a volatile means of investment and, like any other investment asset, their value is prone to market fluctuation. Before committing oneself as a crypto investor, it is best to first understand the nitty-gritty of cryptocurrencies. A crypto market guide from a reliable place like Capital.com is a useful resource to help anyone get conversant with technical and market factors that are affecting the value of any cryptocurrency.
Here are key factors that influence the price of cryptocurrency:
1. Supply and Demand
The principle of supply and demand is a crucial factor that affects a lot of investments in the financial sector. The stock and forex markets all fall victim to this principle, and so do cryptocurrencies. If there is an increasing interest in a cryptocurrency on the backdrop of limited supply, it’s no secret that its price will soar through the roof. When the demand for any crypto-coin goes up, its value appreciates as a result, and vice versa.
The supply of cryptocurrency into the market determines its availability or scarcity. If a cryptocurrency is readily available as a result of constant production, it means investors can easily get it on most exchanges and at a considerable price. On the other hand, the scarcity of a cryptocurrency affects market capitalization, which will, in turn, cause a surge in its value.
2. Number of Competitors
While Bitcoin (BTC) may be the dominant player in the cryptocurrency field, it’s not alone. Other alternative crypto coins like Tron (TRX), Litecoin (LTC), Etherium (ETH), and Tether (USDT) are increasingly gaining traction and becoming notable competitors.
To attract investors, a crypto coin can introduce new features that can sway interest to its advantage and subsequently undermine its competition’s value. Such competitive market practices are normal and create a dynamic market that is always fluctuating in prices.
3. Exchange Platform
Cryptocurrency exchanges vary from one to the next, offer different kinds of services, and have different forms of security. An exchange platform might be popular for its security mechanisms that offer the right protection for investment and secure clients’ data.
A popular cryptocurrency exchange platform will most likely have a slight edge in cryptocurrency values as opposed to unpopular ones.
4. Media Effect
The information stockbrokers get from media outlets is a contributing factor to most of their opinions. Increased media coverage gives investors a better understanding of the crypto market and the players within it. The media has the ability to draw more positive interest in cryptocurrencies as well as put off crypto-investors.
Information can either increase demand or bring panic and make the value of a cryptocurrency plunge. Above all, positive media coverage will likely result in higher prices, whereas negative media coverage will result in a reduction in value.
5. Cost of Production
The cost of producing an individual crypto-coin determines its supply and price in the market. Cryptocurrencies incur real production costs just like any other physical product. Electricity consumption, for instance, accounts for the majority of the production cost of any cryptocurrency. The time taken to produce one virtual coin is also a factor that influences the total production cost. The cost of production directly influences the value of the final crypto-coin.
It is without a doubt that any cryptocurrency investment brings its own rewards and risks. However, delving into a proper crypto market guide can give a stockbroker great insights into the right steps to take.
