Factors Influencing Cryptocurrency Prices
- Crypto
- August 27, 2022
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The cryptocurrency market has been accessible to the general public for over a decade, but its popularity is still a new phenomenon. Many people are investing in any of the numerous digital currencies available today. Making these coins, also known as Mining, is restricted to those who use powerful computers to solve complicated mathematic equations to create virtual currencies, such as Bitcoin, the oldest and most well-known of all. Based on the notion of decentralizing, the blockchain technology behind these coins plays an essential part in maintaining them and creating a secure environment for them.
There has been a surge in investors’ interest and volatility in cryptocurrency, including Bitcoin. The dramatic shifts in cryptocurrency prices are making investors wonder if they’re not gaining the benefits of significant gains or risk damaging losses due to having stakes on the table. In 2017 alone, we saw Bitcoin price rise from around $1000 BTC to an astounding $19,783.21 BTC.
At present, for 10,000 dollars per unit, Bitcoin seems to be stable, but investors who are familiar with the market are aware of the need that nothing can remain static in the world of cryptocurrency. We’re digging deep to discover four main factors driving prices for cryptocurrency to fluctuate.
Production Cost
The cost of production is another element that determines cryptocurrency’s value. Miners employ special equipment or servers daily to make new tokens and verify network transactions. Miners receive virtual tokens and fees from the network for their effort.
The network activity of the miner allows decentralized cryptocurrency to continue to work. Therefore, if the mining costs rise, the value of cryptocurrency could also increase. It’s not sensible for miners to invest their money to mine new cryptocurrency tokens if the returns aren’t sufficient enough to pay for the costs and generate profits. However, this may not be the case, and it’s not uniform across all cryptocurrencies. Therefore, it is important to investigate before you commit to it.
Crypto Exchanges
To learn more about cryptocurrency, one can go to an online crypto exchange like KuCoin. All information about each cryptocurrency, such as its market capitalization performance over the last few months and weeks, its real currency used in circulation, and its current and historical value, are accessible on the site. The cryptocurrency coins, like Bitcoin, KuCoin, Ethereum, and Dogecoin, are also used for trading on these platforms at an amount.
If a cryptocurrency token is listed in a wide range of cryptocurrency exchanges, it will increase the number of people purchasing and using it. If you require multiple businesses to exchange any cryptocurrency token, you’ll be charged fees for each exchange, increasing the cost of investing.
Government Regulation
Certain governments don’t like the unregulated and decentralized nature of cryptocurrency. Therefore, they are looking to find ways to regulate the cryptocurrency market.
The most effective way to regulate cryptocurrency is to create a tax rate for all fiat currencies used to withdraw their money. But, this tax will apply to specific tokens. Therefore, those who want to cash out their earnings may use another coin to withdraw their money.
Many countries decided there’s no better way to manage the cryptocurrency market than prohibiting Bitcoin, Ethereum, and other coins. If a country with a significant number of crypto users creates new regulations for cryptocurrency, it could affect the value of cryptocurrency.
Social Media
The value of cryptocurrency is said to fluctuate due to the social media hype. This happens in two ways: media news can lower or increase prices. Also, there is the influence of influential people in the crypto community, for instance, Elon Musk, who has influenced the DOGE coin’s value many times, whether intently or not.
Social media is often characterized as chaos; however, there’s information to be discovered. For instance, the crypto exchanges provide updates on blockchain currencies or information about cryptocurrency scams.
Taxes
In October of 2017, The Internal Revenue Service announced that Bitcoin and other cryptocurrencies are considered an asset to be tax-free. However, this announcement has had mixed results regarding price volatility, and on the positive side, cryptocurrency valuations benefit from their public recognition as officially recognized assets. However, some investors view the IRS announcement as a sign that the agency might be planning to expand its supervision in the coming years.
Public Perception of ICOs
Initial Coin Offerings increased dramatically in 2017, with many of which attracting investors to the cryptocurrency industry because they promise huge yields. Many investors don’t realize that ICOs dislike cryptocurrency, even though they’re alike. An ICO is a method of raising money through which businesses sell their crypto tokens to pay for cryptocurrency, usually Bitcoin and Ethereum. Unfortunately, several fraudulent ICOs were able to gain investors’ trust and then vanished, which has eroded confidence in investors who invest in the industry. The negative impression has impacted the public image of digital currencies, affecting adoption rates. On the bright side, there are plenty of legitimate ICOs in the market, striving to comply with SEC regulations and establish a reliable ecosystem.
