The cryptocurrency market is still relatively young and there is still a lot of confusion about how it all works. Cryptocurrencies are subject to many of the usual market pressures that affect every commodity or asset, but there are also a number of factors that are unique to the cryptocurrency market.
Supply And Demand
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As with all things in life, supply and demand affect the value of cryptocurrencies. For most coins, the underlying network code ensures that balance is maintained between supply and demand. However, there are some users, known as whales, who hoard large amounts of cryptocurrency in order to drive down the supply and drive up the price. Once the price is high enough, they can then dump their crypto on the market, selling it for an inflated price until they flood the market, and the value collapses.
The smaller a cryptocurrency network is, the more susceptible it is to the actions of whales and others who manipulate the price by affecting supply and demand.
Regulation Of The Cryptocurrency
Regulations surrounding cryptocurrencies are constantly changing but so far, the reaction of most nations has been cautious optimism. However, this could all change very quickly and just as there has been good news for crypto, there have also been some setbacks as well. Regulatory rulings surrounding cryptocurrencies will inevitably impact their value, as markets like good news.
One of the biggest hurdles to the widespread adoption of cryptocurrencies like Bitcoin and Ethereum is the difficulty that users currently have in spending them. While there are some cryptocurrency ATMs and payment terminals on the market now, it is more difficult to spend crypto than it is spending fiat currency. The more infrastructure is out there, the easier it becomes for people to spend their cryptocurrency. Not only this, but more cryptocurrency infrastructure means that cryptocurrencies will be more visible, and adoption is likely to increase.
The first lesson of cryptocurrency trading for beginners is that you need to purchase what is known as an entry coin in order to start trading. Entry coins are coins like Bitcoin and Ethereum that can be purchased directly for cash. Once you have an entry coin, you can take it to an exchange and start exchanging it for other cryptocurrencies. The number of coins that you can use as an entry coin is constantly growing, but it isn’t these that drive the market.
When major exchanges decide that they are going to start listing a new coin and allowing their users to trade it, its value will immediately increase. As a result, even rumours concerning a new coin being added to an existing exchange can cause the price of the crypto in question to spike significantly.
There are just some of the many complex factors that impact the cryptocurrency market. The value of cryptocurrencies changes regularly; they are notoriously volatile. If you want to start trading cryptocurrencies, you should familiarize yourself with the market and the factors that impact it.