What seems to intimidate most concerning the cryptocurrency market is the constant fluctuation of its price and popularity. To help you understand why this happens, here is some insight into what influences the cryptocurrency price and why the crypto market provides prospects for profit. 

The Basics Of the Cryptocurrency Market 

Like anything one invests in, there is no definite path to success. With cryptocurrency, third parties like banks are taken out of the picture, making the process more direct and secure. With the first digital currency coming about in 2009, cryptocurrency is still a relatively new form of finance. 

In short, cryptocurrency is just a digital currency that is entirely decentralized. This alternative payment option is created using encrypted cryptography through complex algorithms. Cryptocurrencies act as both a currency option and a virtual accounting system.

A Bitcoin Coin on a blue cryptocurrency market chart.
What Influences Price in the Cryptocurrency Market?

What Influences The Cryptocurrency Price?

Although cryptocurrency is decentralized, a few main aspects influence the price. Here is a well-researched list of most contributing factors to help you understand what they are and why they have a hand to play in the price. 

Nod Count

Nod count is at the top of this list for a reason. It shows the activity within a network. The nod count number reflects the active wallets that exist within the network in question. This number will help investors determine the community’s and network’s strength, which will play a big hand in the coin’s success.

Cost Of Production

For those who don’t know, cryptocurrency has to be mined by using big computer networks and specialized hardware. If the cost of this production goes up, so does the price, directly affecting the demand for the token. The more stable the production price, the better the cryptocurrency’s success rate will be. 

Crypto Exchanges

Crypto exchanges play a huge role in the crypto ecosystem, and the easier the accessibility, the more people will get involved. The crypto game aims to gain as much exposure to people’s everyday lives as possible to make it a more accessible option. When picking a crypto exchange site, one must consider the fees that come with it. Read the terms of service or user guide to ensure you don’t miss any fees. 

Competition

Competition helps drive demand, and with cryptocurrency, it’s no different. Although Bitcoin is the most dominant and longest-standing cryptocurrency, its competition, such as Ethereum and Litecoin, help stabilize the demand for BTC.

Government Regulation

Cryptocurrency is decentralized, as mentioned above, but that doesn’t mean countries cannot create regulations surrounding it. Currently, many countries are constructing regulations that provide an advantage to both the investor and the country. 

Most regulations relate to taxes, and the outcome has a huge play in the success of cryptocurrencies. The negative side of regulations is that if a country with a high use rate implements unfavorable rules, it’s likely that crypto coins will decline. 

Scarcity

Scarcity is a huge aspect of the crypto price. The better balanced the scarcity is, the better the demand for the crypto in question. The ideal ratio is 50/50. If that had to get to 40% being in circulation and 60% still stored, the cryptocurrency may face a price decline. 

Social media 

Nowadays, social media plays a part in just about anything, and the reach of cryptocurrencies is one of them. A great example of social media influence is the price of Dogecoin and how one tweet from Elon Musk helped increase the going rate. This hasn’t happened once, but several times, proving its direct effect on the price. 

Other Factors

Another well-known factor that affects the price of crypto is the Bitcoin whales which buy and sell huge chunks of BTC to make a splash and move prices. To be classified as a Bitcoin whale, one must own 1,000 BTC or more. 

With such an extensive collection, the sale of this size will cause waves of fluctuating prices across the market. Another factor to consider is getting involved when the price is low. The reason for this is that you have the chance of owning more and gaining bigger profits. 

The Cryptocurrency Market Currently

The cryptocurrency market is continuously growing, creating a new landscape of wealth. With coins coming onto the market daily, the competition and earnings are skyrocketing, creating more lucrativeness and opportunity. The market is bearish, with prices set to fluctuate for the next couple of weeks, making it the perfect time to invest and start your journey to digital wealth.