Cryptocurrencies are highly volatile. Price fluctuations have defined the cryptocurrency market. To better understand how the value of cryptocurrencies changes from time to time, we discuss 5 major factors that move crypto prices.
Government Regulation
When a government of a country makes any crypto-related move, it has the ability to affect the value of cryptocurrencies. Several governments worldwide have already implemented laws to regulate cryptos to protect the public.
Back in 2017, the Japanese government made a decision to legalize cryptocurrency as a form of legal currency. The announcement caused Bitcoin prices to surge. However, news about blocking cryptocurrency exchanges push Bitcoin prices lower. That’s what happened when the South Korean government announced its plan to ban cryptocurrency trading in January 2018. The local price of Bitcoin dropped as much as 21%.
News
News about cryptocurrency has a huge impact on the value of cryptos. The impact may either be positive or negative. Of course, positive news will drive prices up, while negative news will push prices lower.
Demand
When there’s a high demand for cryptocurrencies because people are willing to pay for it, prices tend to go up. There’s this crypto lingo knows as FOMO = fear of missing out. When people see that the price of certain crypto is going up, they worry about missing an opportunity of investing in it. Thus, they start to buy that crypto faster.
Supply
The maximum and total amount of Bitcoins that can ever exist is 21 million. Miners have already mined 80% of the total Bitcoin supply. Because there is a limited supply, it causes speculations that make Bitcoin prices go up.
Public Hype
What people say about a cryptocurrency can impact its value, just like in the Forex and stock market. Of course, you can’t just ride on the hype. You have to analyze what really moves the prices before you make any trading decision.
