February 5, 2023

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What Causes Cryptocurrency Value Increase?

 

One of the digital assets’ main distinctive features is the high volatility of crypto prices. Take any crypto coin and track its chart. You will see that a crypto coin price is constantly changing and never stable. Even little market volatility allows traders to profit from the price differences.

Digital assets are not issued by the government, and cryptocurrency exchange rates are not established by regulators. So what causes crypto coins value up and down movement? Let’s talk about it in this article.

The Key Factors Affecting Crypto Currency Prices

Community Involvement

The scale of the community using a crypto asset impacts its rate directly. Here the same traditional market laws are working – the higher the demand for the asset, the bigger its value. If a crypto project brings something new and useful for the market and users, more and more people want to own the asset, stimulating the demand to grow. If people do not sell the asset massively and, on the contrary, hold them, demand increases supply, which spurs price growth.

Emission

Coins emission also affects the supply-demand ratio. If the coins emission is limited, it helps maintain the asset’s demand. If coin emission is unlimited, supply exceeds demand and crypto currency prices drop.

Market trends

There is a bull and bear market trends. Imagine that some large investors rapidly sell their holdings in masses. What happens, then? Demand drops, causing other investors to sell their coins, leading to the market collapse. This is called the bear market trend.

When a bull trend starts, demand exceeds supply, prices grow, and more and more people strive to buy coins. Important to remember that the crypto market is cyclical, and after every sharp price increase, correction and drop follow.

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There are other external factors affecting cryptocurrency exchange rates, such as:

  • global economy, crisis;
  • inflation;
  • news background;
  • collapses on some large crypto exchanges.

The best idea is to purchase crypto assets when their price has dropped. In that case, you have all the chances to make a fortune during the next market upward trend.