What Determines Cryptocurrency Price?
This is one of the most common questions asked by cryptocurrency enthusiasts. Decentralized cryptocurrencies resist censorship and they do have their value dictated by some specific factors. Before you use a platform like investous.com to make a crypto investment, it is vital that you understand what drives cryptocurrency price. The most important factors to analyze are the following.
The technology that was used to create the cryptocurrency is vital. If the technology is flawed, it is impossible for the crypto to gain real value.
Cryptocurrencies are digital in nature so coding bugs can exist. For instance, there was an Ethereum smart contract that had a huge flaw in the past. It was exploited, leading to $30 million being stolen by a hacker. This eventually led to ETH being split into 2 versions. One had the bug and the other did not.
Number Of Nodes
Node count is important because it indicates cryptocurrency value. This is a measurement of the number of active wallets that exist in a network. Such information is really easy to find online.
When you analyze node count you quickly understand the strength of the community behind the cryptocurrency. If there are more nodes present, you look at a stronger community. If the community is stronger, it can go over crises faster.
When a cryptocurrency is being adopted by companies and becomes more popular, countries and governments react. As demand grows, more people learn about the cryptocurrency and start to consider buying.
As with anything in the financial market, demand and supply influence value. For instance, in the event that more people want to buy BTC, the price goes up. The opposite also applies.
Remember that cryptocurrency supply is limited. This is why increased popularity always leads to prices going up. However, when there is a scandal that affects a coin, demand goes down. This leads to prices going down.
Whenever the currency gains adoption, value goes up. This happens because of the limited nature of cryptocurrencies. A demand increase leads to price increase. As the cryptocurrency can be used in a real-world scenario, people learn about it and more will buy.
When a government wants to regulate a cryptocurrency, it means that the digital asset reached a mainstream status. While regulations can lead to an unwanted situation in which cryptocurrencies are centralized, they do have a huge impact on price.
Critics claim that transactions are going to be controlled and reduced due to regulations. However, if regulations are in place, the value of a cryptocurrency does go up.
The factors mentioned above have a clear impact on cryptocurrency value. Usually, they do have an effect at the same time. This can easily lead to values changing really fast. Cryptocurrencies are volatile and price corrections can always appear. Due to this, you need to be really careful when you invest in cryptocurrencies. Only invest the money that you can afford to lose. Do not take out loans or buy cryptocurrencies with funds that can negatively impact your financial well-being.