How Cryptocurrency Price Moves in the Market?

By chirag
October 3, 2019 4. min read
Last update on: August 19, 2021

If we had to make a list of some of the top volatile elements of the world, the one name that would top even Mercury is Cryptocurrencies.

Ever since the launch of cryptocurrencies, they have found themselves being counted as one of the most fluctuating and volatile topics of the world, seeking to get to the bottom of what is cryptocurrency.

There is hardly any investment enthusiast who has not tried to crack the code of why cryptocurrencies fluctuate, what causes cryptocurrency to fluctuate, why does bitcoin fluctuate so much, and how to take that understanding, what are cryptocurrencies market cap, and converting the market stats into insights that would make the investment successful.

While the industry has managed to make itself one that is extremely difficult to gauge in terms of cryptocurrency prices movement, let us try to decipher how the price of cryptocurrency changes in the market by understanding the bitcoin worth, and how and why the cryptocurrencies move.

But let us first start by drawing parallels between Cryptocurrencies and Fiat Money.

Cryptocurrency vs Fiat Currency: How the Two Compare Against Each Other?

The biggest comparative factor that stands between the cryptocurrency vs fiat currency debate is their backing. The fiat currencies are backed by the central governments and its value is derived from the fact that the central government states it has value and then the parties transacting in the value are putting their trust in them. In the case of fiat currency, central banks control the entire supply of money and thus inflation.

Cryptocurrencies, on the other side, were brought into existence to not let the central government have the autonomy to regulate the funds of an individual. And because they have a fixed supply, the devaluation through inflation is next to non-existent. Supply and demand is the most important determinant for crypto market prices.

supply and demand

Apart from this, both cryptocurrency and fiat currency come with similar characteristics: they both can be used as the medium to exchange services and products and they can store value.

Why Cryptocurrency Prices Fluctuate So Much?

A single statement answer to the question of what drives the price of cryptocurrencies would be – because it is still at a nascent stage.

Being a market that is yet to find its set of logical use cases, cryptocurrencies are still at a very nascent stage. And the result of this newness is the high volatility in the industry, which is majorly driven by the heightened experiments that investors make to get a sense of how the cryptocurrency prices fluctuate or why does bitcoin fluctuate so much?

An example of this can be seen in the fluctuating Bitcoin value cryptocurrency market price that the famous coin has shown this year –

 

Bitcoin Price 2021

Besides this nascency, there are several other factors that affect the frequently changing cryptocurrency value in the market.

What Is Cryptocurrency Market Fundamentals Analysis?

Fundamental analysis (FA) is a methodology utilized by investors to build up the intrinsic value of a resource or business. Their primary objective is to decide if the resource or business is undervalued or overvalued based on the number of external and internal factors. Investors can then be able to use that data to strategically enter or leave positions.

Crypto fundamental analysis includes bringing a profound interest into the accessible data about a financial resource. For example, you may see its use cases, the number of individuals utilizing it, or the group behind the project.

blockchain use cases

You will probably arrive at a solution on whether the resource is undervalued or overvalued. At that stage, you can utilize your knowledge to advise your trading positions.

Most cryptocurrency projects aren’t similar to traditional organizations. You don’t have loads of information with all cryptocurrency price history to filter through like you would with traditional stock shares.

Since crypto is in its early stages, it is speculative.

There are few factors to pay special attention to while analyzing an investment:

  •         Target market
  •         Demand, tokenomics and utility
  •         Releases/development
  •         Partnerships
  •         Market cap
  •         Competitor comparison
  •         Community and reviews
  •         Status and active users
  •         Price history and age
  •         Real world use case
  •         Liquidity and volume
  •         Regulations

Factors That Affect Cryptocurrency Price Movement In Market

The factors affecting price of cryptocurrency could range from the scope of cryptocurrency application in the present day to the future uses of cryptocurrency coin and a series of other linked elements falling in the development of the cryptocurrency space. Here are some of those reasons that bring about a crypto market prices movement.

1. Utility of the Coins

Any sound Blockchain development company would tell you that a cryptocurrency should have a strong use case in order to incentivize people to hold the coins.

Let us look at Ethereum as an example to explain it further. For executing the commands and developing applications on the Ethereum blockchain, one would need to have ETH to convert into gas and represent the ‘fuel’ of Ethereum.

Thus, the more the people who execute transactions and develop applications, the more would be the demand for ETH and greater would be the crypto market prices. The current ethereum price is 3585.66 US dollars. In short, the bigger the role of cryptocurrencies, the greater would be the cryptocurrency market cap.

2. Scarcity

Scarcity denotes the finite mechanism of cryptocurrencies.

In economics, a stable supply of any item increases its value in the long term for it is assumed that the demand would also increase. This, in turn, creates a scarcity for there are only a few coins in circulation. Some brands even use a burning mechanism, which means destroying a part of the coin supply. This in turn, increases the coin value for there is lesser coin supply.

3. Assumed Value

A crypto price can only be as valuable as the market deem fit and the market values it on the basis of factors which are at the center of the project development. Here are some factors that determine the value of projects –

  • One that constantly achieve the milestones mentioned in its whitepaper
  • Partnership and collaboration with credible companies
  • Launch of MVP or beta version
  • The growth of the cryptocurrency values and market

4. Inflation of Fiat Currency

When the price of fiat currency declines, the price of cryptocurrency increases go up with respect to that currency. This happens because you would be able to get more currencies with your cryptocurrencies.

cryptocurrency price fluctuations

5. Mass Adoption

Driven by the sentiment that the more a product is in demand, the greater would be its cost, the crypto market prices movement goes up with greater adoption that it sees in the market. This one formula has been the core reason behind the rise in prices of Bitcoin, it has answered the question why does bitcoin price change? So the more use cases a coin will see (like in case of Bitcoin) the greater would be its overall cost.

6. Whales

As the term denotes, Whales are those Bitcoin wallets that have around $1 billion in them. They make it very difficult to put any price target on the cryptocurrency.

As per Wimmer, the founder of Wimmer Financial LLP, explains: “The crypto market is dominated mainly by ten big whales or privates. They are massive in the market and take up a lot of space and volume so if you take the top 10 or even 50 you will have a lot of the volume covered already. It is too easy to manipulate the market so far”. This technology is ready to bring a revolution in the market with the way the bitcoin wallet app cost development and current cryptocurrency prices are taking rounds in the market niche.

One way these ‘whales’ fuel the crypto market prices manipulations is through the rinse and repeat trading technique. Under this approach, a whale carrying huge crypto holdings begins selling them at lower than the market rate, which in turn causes a panic situation where small-time traders start selling off their holdings. The whale, meanwhile, waits through the panic state till the current cryptocurrency prices or value reaches rock bottom. And just when the price is low, they swoop in and buy more cryptocurrencies.

Besides these factors, if there is one thing that is and would continue to affect the all cryptocurrency prices fluctuations greatly is the regulations’ set. Presently, the speed at which governments are passing out regulations are limited to a huge extent, thus keeping cryptocurrencies reaching their mass adoption potential. But the more regulations, the greater would be the adoption and thus the rise in crypto market prices.

Features Of A Cryptocurrency

1. Secure Cryptocurrencies

Crypto prices are secured by cryptography codes and locked by utilizing a public cryptographic framework. Every owner has their own private key. Thus, other than the owner, nobody can gain admittance to that private key. Also, cryptography utilized in making this private key is so solid and the numbers are so big that it’s practically difficult to break. That is the reason cryptocurrencies are really secure and can be utilized with no dread of safety.

2.  Irreversible Transactions

One of the inconveniences of cryptocurrency is the irreversible transactions. At the point when you use currency like bitcoin, you need to give affirmation before the occurrence of transactions. When you give the affirmation, the transaction is started. Thus, to manage the transactions in cryptocurrency prices, one has to be significantly responsible before confirming any transaction.

3.  No Permission Required

No permission implies that there would be no guards who will prevent you from utilizing the currency. All that is required is the installation of free software before using it. This particular element gives users a great deal of independence and they can utilize crypto as they wish. 

4. Super-fast 

Another incredible feature of it is that they are super-quick. Once you initiate a transaction, it is quickly caught by the network and it is affirmed within minutes. 

5. Location Is Not An Issue

In cryptocurrency, the physical location of the owners does not matter at all. It does not matter where you are, you can send cryptocurrency values to someone you know down the road or you can send it to anyone living in another part of the world. The transactions would take a similar time and would be treated similarly.

blockchain application development 

FAQs About Cryptocurrency Price Movement

1. What is the total market cap of Cryptocurrency?

The cryptocurrency coin market cap keeps changing on the basis of the crypto market prices movement, which, in turn, varies on the basis of different factors. In case you want to get an idea of the current cryptocurrency coin market cap, follow this link – https://coinmarketcap.com/

2. Is it safe to invest in cryptocurrency?

Cryptocurrency value investment, like any and all other forms of investments come packaged with unsureties and risks. So nobody can guarantee that you would get success when you invest in cryptocurrency.

3. How to predict cryptocurrency prices?

The two methodologies used to predict the all cryptocurrency price history movement are: technical and  fundamental analysis. While the fundamental analysis looks into the economy, company or security, technical analysis methods gauges the crypto price movement direction on the basis of previous market data, historical prices and the volumes found on the price charts.

4. What is Bitcoin’s current price?

At the time of writing this article, the current price of cryptocurrency like bitcoin price was 44,439.13 USD.

5. What is cryptocurrency mining?

Crypto coin prices mining is the method where transactions between users are checked and added to the blockchain public record. The mining process is additionally liable for bringing new coins into the current flowing supply and is one of the key elements that permit cryptocurrencies to work as a shared decentralized network, without the requirement for a third party central authority. 

6. What is the first cryptocurrency?

The first cryptocurrency to make it to market was Bitcoin, which was launched in January 2009. Bitcoin was created with the idea of being a peer-to-peer electronic cash system.

7. How much is the Cryptocurrency market worth?

The total market value of all or the total price of cryptocurrency stands at $2.48 trillion currently.

8. Why does bitcoin value fluctuate?

One reason what makes bitcoin price go up against fiat currencies is the perceived store of value versus the fiat currency. It means that it has to do with the uncertainty of bitcoin as a viable form of currency or store of value.  Another reason for price fluctuation includes reasons such as media coverage, speculation, and availability.

Chirag Bhardwaj
chirag
Blockchain Evangelist
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