As the overall global financial situation becomes more erratic, increasing numbers of people are turning their attention to cryptocurrencies. For many who have an interest in non-traditional asset classes like crypto, volatile stock markets, inflations, world political turmoil, and similar situations make this market all the more attractive. But it’s essential to have a basic grasp of what drives prices in the crypto space.
Luckily, there are many obvious forces behind the rises and falls of cryptocurrency prices. The trick is creating a wallet and figuring out which ones are dominant or weak at any given moment. The truth is that no one has a full understanding of exactly how those forces mix with each other and create conditions favorable or unfavorable for the market. The best way forward is to review the four main price drivers and make an educated guess about which ones are the most powerful. Here are pertinent details about each one.
In the long run, the legal atmosphere could be the single biggest determinant for the prices of bitcoin, Litecoin, Ethereum, and other coins. That’s because national governments have the power to pass legislation that essentially bans or strictly controls the public’s use of such assets. China is a perfect example of a country that decided to ban the use of cryptocurrencies. And in the European Union, the US, Australia, India, and many other developed nations, legislation is in the works that could significantly affect the fate of use, ownership, and investing.
Whether or not you use any of the popular trading apps such as Easymarkets or others, you probably already know that the general state of the economy can have a major impact on various values. In general, when a nation’s economy starts to perform badly, many people seek out alternatives in the form of precious metals, cryptocurrencies, and other non-traditional asset classes. It’s often the case that the overall state of the global economy has a direct effect on prices. For the same reason that people seek financial security at the local level, consumers worldwide view the international state of the economy as a gauge of how well or poorly the markets are performing.
Demand and Supply
Every asset is affected by changes in demand and supply, and there is always a chance that digital currencies could collapse at some point. This is particularly true for assets like bitcoin that have a finite number of total coins in existence. Other cyber-coins are still subject to the laws of supply and demand but not to as great an extent. While supplies might not fluctuate much over a designated time period, demand changes almost daily as public attitudes are in a constant state of being more or less confident toward the idea of non-traditional currencies.
Attitudes can have a measurable impact on the price of any asset. In the case of bitcoin and Ethereum, for instance, consumers and investors have come to accept the assets as being viable forms of trade and stores of value. It has taken more than a decade for that to happen, but having public confidence of being an asset class is slowly increasing.