Think of a toddler in the playground, laughing in glee as he flies through the air on a swing. He goes up, then down. And so the sequence repeats itself, on and on, unceasing, for as long as the toddler wishes to enjoy the ride.
This picture best typifies the volatile turns crypto takes today. No single token is exempt from this pattern, not even the almighty Bitcoin!
Are you thinking of investing in cryptocurrency?
Do you want to know more about it, such as using a coin price tracker so you would make a profit when you invest in it? Then you have come to the right place!
Cryptocurrency is a digital currency created to serve as a medium of exchange.
It’s complicated for you as a trader not to make occasional trading mistakes, errors that usually lead to the funds. However, the goal is to make more profits than losses.
Below are tips that will guide you on the causes of cryptocurrency fluctuations and also assist you in knowing the right time to trade.
Internal Governance
As you already know, cryptocurrencies are decentrally administered. No single authority is responsible for minting and securing the network. Instead, decisions within the ecosystem are made and reached through a consensus.
Nevertheless, many cryptocurrencies face issues regarding scaleability because making these decisions often take time. For this reason, many cryptocurrencies and blockchains have experienced “hard forks.” These hard forks occur when there’s considerable dissent over the protocol governing a token, with several nodes in the community electing to start another blockchain based on the old one but with different rules and governing protocols.
For instance, tokens like Bitcoin Cash and Gold are offshoots of the original Bitcoin (BTC) and operate on different protocols.
Nevertheless, when these hard forks occur, the new cryptocurrencies’ values generally tail off and drop.
Utility
Utility indicates usefulness. The more useful a cryptocurrency is, the higher its value will be.
For instance, Bitcoin is primarily a means of making secure payments. On the other hand, Ethereum is capable of so much more, as it is the foundation of decentralized finance. Developers trade in its native token, Ether, using it to pay for access to its blockchain to build useful dApps.
Today, Ethereum is the second largest cryptocurrency by market capitalization, with its value predicted to grow further in light of its expected switch to a Proof-of-Stake consensus mechanism.
Wide acceptance of cryptocurrency
The value of any product or currency can increase if the masses accept and adopt it. If there’s a limited number of a particular coin or token available, there will be an increase in demand, eventually leading to an increase in the price.
Activities of traders
The number of investors who trade, buy, and sell crypto can lead to a rise and fall. The price will eventually rise. For instance, if more people are buying a particular token and fewer are selling, it will make the seller ask for more money, and the buyer will have no choice but to pay for it since there’s a limited supply of the token.
On the other hand, if more people are selling a particular token and few are buying, it will reduce the price because, in this case, the sellers are more than the buyers.
Once the seller refuses to reduce the price, the buyer has other options, and for the seller not to lose his customers, he has to give a discount. This way, the price will drop.
Regulation
This is one of the factors that affect crypto stability and vulnerability. If many companies stop accepting cryptocurrency as a medium of exchange for goods and services, The value will drop, and the price will eventually fall.
For example, if Tesla stops accepting Bitcoin as a medium of exchange, it could somewhat affect the token’s value.
For more accessible and safe transactions, regulations are required. Assets such as ETFs provide more access to cryptocurrencies for the investor, which leads to value increments, which could negatively impact cryptocurrency.
For instance, if the rules made by the governing body are not in favor of cryptocurrency investment, it may lead to a fall in the price, or it could lead to the devaluation of crypto in that country.
The demand and supply
The forces of demand and supply can determine the value of any product.
Demand for a token increases based on how useful it is to own that token, and the supply depends on how many coins are being mined and how many owners want to sell their coins.
They both determine the value of any goods, not just cryptocurrency. The price or value will increase if the demand exceeds the supply.
The node count
One of the functions of the node is to show the number or measurement of all the active wallets on the blockchain.
The nodes also show how strong a community is. The higher the nodes, the stronger the community. This implies that the value of cryptocurrency increases.
When the nodes are low, it indicates that the community is weak. And, the chances are that the token’s value will decline.
Media Publicity
One factor affecting cryptocurrency’s value is the use of influencers. Influencers are public figures. People look up to them, and many make them their idols, looking forward to being like them.
When an influencer promotes a particular token, they try to talk up the token’s finer points to make it appealing to potential investors.
For instance, if Bill Gates comes out and talks about a particular cryptocurrency, he is promoting that token. As he is a well-respected philanthropist, his pitch will make a lot of people want to purchase it and eventually leads to an increase in its value.
Since there is high demand for the token, it will increase price and value and make the rest lose value.
The news is another factor affecting cryptocurrency’s rise and fall. When a person, such as a TV personality, comes on a live broadcast to educate the public about a specific token, giving them the reason why they need to purchase it and also mentioning the advantages of getting one. This way, they are promoting cryptocurrency.
For instance, Elon Musk tweeting about Dogecoin sent its value skyrocketing- such is the impact of speculation.
Bitcoin Price
You might be slightly surprised to learn this, but it is true- Bitcoin’s market leanings dictate the fortunes of altcoins.
Bitcoin is the largest cryptocurrency by market cap, with its trading volume far outstripping that of altcoins by a considerable margin. As it’s the most traded token, its fortunes affect that of its competitors.
For instance, 2022 has been a bad year for crypto investors, primarily because of the massive selloff in digital assets. However, an underlying reason for this selloff is Bitcoin’s remarkable crash which has seen it lose more than half its peak value.
Security Protocols
A cryptocurrency is only as valuable as its blockchain is secure. Cybersecurity is a primary determinant of a token’s value.
There have been instances in the past where blockchains were successfully hacked. Long after the damage had been rectified, their respective native tokens remained badly devalued, with many ceasing to exist afterward due to liquidity issues.
Scarcity of cryptocurrency
A limited supply of a particular product can lead to an increase in price.
This also applies to cryptocurrency. When a specific token is scarce, it leads to a hike in price, leading to an increase in the value.
Many of the new tokens on the market have virtually unlimited supplies. And this is one of the reasons why their values will never rise considerably.
On the other hand, Bitcoin’s severely limited supply means that its value remains head and shoulders above the rest.
Cryptocurrency decentralized nature
A token’s value is not determined by any regulatory body, president, or government. That is to say that these bodies and agencies do not have a say and cannot determine the value of cryptocurrency.
For instance, fiat currency is relatively stable compared to cryptocurrency. Although there are some exceptions, the rule is that a well-run government with a strong economy will maintain an equally strong and stable currency.
This is not the case with cryptocurrency.
Cryptocurrency is a decentralized digital currency that is determined by the free market. The number of people trading it determines the value of cryptocurrency. For instance, if the number of people selling Bitcoin is low and the number of buyers is higher, it will increase the price and value.
The same applies when more sellers than buyers; the price will drop.
Communities
The number of investors determines the strength of the cryptocurrency community. The more people purchase the token, the stronger the community will become. Once the community is strong, the cryptocurrency’s value will rise, leading to the cryptocurrency’s sustainability.
The value of any product can be determined by the number of users that have access to it. The more users, the more the value increases, and fewer users have less value.
Conclusion
Now you know how to make your cryptocurrency profitable. The tips above will improve your crypto knowledge and make you a better investor. All investors make mistakes, but the tips highlighted in this article can serve as valuable pointers to tell you when the time is right for you to purchase, sell, and observe.
Crypto is making blooming waves, so try and invest in it today.
