Investing in cryptocurrencies is very popular in recent years, especially in some of the most popular ones, such as Bitcoin, Ethereum, and some more. The main reason that is making people consider investing in digital currencies is a good business option lies in the fact that prices of most cryptocurrencies became much bigger, and, according to some experts, we can expect that blockchain technology will become accepted worldwide, and see virtual currencies as a regular payment method.
There are various ways to make a profit from cryptocurrencies, and the most popular method is a simple buying to hold and wait for its price to become higher. On the other hand, many factors are affecting the value of various cryptocurrencies, and you should be aware of that before you decide which ones to buy. In this article, we are going to introduce you to some of the most important factors that are determining the value of every cryptocurrency.
Mining Difficulty
After some period of active mining, the blockchain of that currency will become well protected and secure, which will lead to a situation where there is a much longer time needed for a cryptocurrency to be mined. When this occurs, the digital currency will have its price increased in most cases.
Inflation
The situation of the global economy and monetary system can also affect the prices of virtual assets. If there is an inflation of fiat currencies, the prices of crypto can become higher because the lower value of standard currencies will lead to an increased demand for digital coins. Also, you will be able to buy more fiat money with crypto if inflation is present.
Statistics and Researches
Experts in the field of economy and marketing are constantly researching the blockchain technology and all possibilities that it can bring as an innovation in the market. Their opinions and results from the analysis they made can also significantly affect the value and demand of some digital currencies. Business leaders can also create an effect in the market by making some big moves. For example, by buying or selling Bitcoin or some other virtual assets in great amounts.
Node Count
The node count can also be used as a method for determining the value of some digital currency by measuring the number of e-wallets that are active on the market. Also, you can analyze it by yourself since there are some online platforms where you can check the node count. You will have to research some crypto by checking its popularity and the total amount of active wallets that are using it. You will see a chart with a market capitalization of all cryptocurrencies.
Market Dilution
Market dilution is another factor that can have a huge effect on the prices of digital coins. The market for blockchain technologies is constantly evolving and bringing innovations. However, the fact that there are hundreds of cryptocurrencies introduced in a short period, there is a great chance that some of them will remain on the same value, or even lose it over time if the demand is low, or they are not so attractive to people. This factor is the biggest problem for new currencies.
High Volatility
While some factors are related to the economy, inflation, and some measures, marketing, and news about the potential of some currencies could also affect their price. The best example for that is when the price of Bitcoin was near 20,000$ a few years ago, and one of the factors that cause its value was a great attractiveness of it in the whole world.
However, a few years after, its price fell to around 3,700$, while currently, it is valued at around 9,500$. The news and analysis have a huge effect on the prices, and when some expert says that some virtual currency has great potential, its value will start to rise along with the demand. On the other side, the fact that digital currencies are under constant fluctuation makes them so attractive for investment.
Innovations in Technology
Technology is also a very important factor when it comes to the determination of the crypto market. For example, the fact that there are a great number of ATMs all around the world, with blockchain support, provides users of e-wallets to become more available to use them wherever they go. That also can lead to a bigger value. Moreover, the introduction of new platforms and online exchanges with higher security could also affect the market of crypto, causing some of them to become more valuable.
Security and Regulations
While your e-wallet is safe with blockchain technology, there were some problems with exchanges, where hackers managed to steal huge amounts of money. The biggest hacker attack led to near 500 million dollars stolen.
Cases like this one can cause the whole market of crypto to lose some of its value. On the other side, countries can also affect prices by introducing various regulations about blockchain technology. While many of them already accept Bitcoin and many other currencies, when most of them become a standard way of payment, with a possibility to charge taxes over them, the value will probably become much higher.
The Demand
Demand represents the most important factor in determining the price of any cryptocurrency. Like with the stock market, if there is a great demand for some particular crypto, its price will instantly become higher. Also, if countries and the global economy decide to introduce or accept some blockchain currency, the demand will become much higher, which will affect the value to become bigger as well. Moreover, if there is a case where suddenly everyone is interested only in selling some virtual asset, the price of it will fall. Bitcoin is the best example of that.
The Bottom Line
When we look at some researches from experts, we can assume that the prices of cryptocurrencies will become much higher than today. However, no one can be so sure about the future of each particular one, especially because there are still no measures from any country that will implement blockchain in their monetary systems. Also, there is always a fear that some countries could outlaw crypto, but that will hardly ever happen.
More and more people are getting interested in blockchain technology. Investing in cryptocurrencies can be a great business option. For more information about this topic, visit https://bitcoin-fortress.com/.
Nicola Holder