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How Cryptocurrency Prices Work: Working Mechanism | Crypto Post Gazette

Why there is so much volatility in the price of Cryptocurrency
Although several years have passed Cryptocurrency still a new term for a majority of people. Most of us are not familiar with this term and the main factor which makes it a risky investment is its fluctuation. You can say volatility is the foremost attire of the Cryptocurrency. That’s the reason people look for Price predictions before investing in any digital coin. There are many reasons behind its fluctuated price here are few of them:

  • When compared with the traditional market there is a lack of liquidity in the Crypto market. There is a huge difference between the total market cap of Fiat currency and digital currency. Any guess? It is more than $89 Trillion.
  • Daily trading volumes also have a huge gap. Cryptocurrency daily trading volume flutters around $14 Billion whereas the traditional market is near $5 Trillion.
  • As you know daily a huge number of users adopt Cryptocurrency and you according to the recent report more than 100,000 users join this platform daily. Many of them have specifically vested interest in the price of cryptocurrency whether it will go up or down. That’s the reason behind its volatility.

Chief Determinants of Cryptocurrency price
One thing is similar in between Fiat currency and Cryptocurrency, their price deciders. I think it is the basic thing and the price of every currency depends on it. Demand and Supply are the two crucial factors which determine the price of any digital coin. In case any particular token has a huge supply and little demand from users and traders then the price will fall significantly. Contrarily, If there is a limited supply of any digital coin and demand is huge then the price will go high.

Another element which drives the value of any particular coin is Scarcity. The round off supply of Bitcoin is 20 Million BTC and in past January the dominating coin has arrived at $20,000 USD. This is a pretty low amount when compared with other cryptocurrencies and thus demand of Bitcoin enhanced.

Our media is also responsible to drive the value of any digital currency. For instance, if any particular cryptocurrency gets negative reviews then you will observe a  remarkable drop in that coin’s value.

Apart from all these factors, there are some more elements which can upgrade the price of any coin such as usefulness, complexity in mining, etc.

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How Cryptocurrency Prices Work: Working Mechanism – Crypto Post Gazette.