What are some of the factors that affect the price of cryptocurrencies in the crypto market?
If you are a crypto trader, especially if Bitcoin is your number one coin to buy, you already know that 2024 was a good year.
It was a year in which Bitcoin crossed the $100k mark in history. It was an unprecedented year, with the bull run predicted to continue this year, although the current price is just below the $100k mark as of the time of writing.
However, the bull run or bull market as some may call it is not always a common thing in the crypto world. While there could be a period when the price rises, last year’s rise was unprecedented.
In fact, during the COVID-19 period, the market experienced a dip, causing some traders to experience losses. This leads to this important question, what causes the price of crypto to go up or drop?
If you are an experienced trader, you might have an idea. However, for beginners, it’s important to know the factors that affect the prices of cryptocurrencies. This is what we will try to achieve in this piece.
Factors that affect the price of cryptocurrency
Like any product, if there is a large supply in the market without an equal demand for it, the price of the product will drop.
This applies to crypto too because if someone sells their bitcoin with no equal demand for it, the price of the coin will drop. It also works the other way, meaning if there is a limited supply of Bitcoin in the market, the demand will likely be high. For that reason, the price of Bitcoin or any other crypto you trade in will go high.
Although Cryptocurrency as a mode of payment is now popular, it is still not accepted by everyone as many still prefer fiat currency.
However, when a popular company announces that they have started accepting crypto payments, this could also drive the price. For example, when Tesla announced that it would start accepting Bitcoin as a form of payment in 2021, the price of Bitcoin rose by 5%.
This also has a negative effect if a well-renowned company announces that it will stop accepting cryptocurrency as a form of payment.
While cryptocurrency remains unregulated, which is one of the reasons why it is popular among people, its price is responsive to regulatory developments, especially in the US.
For example, the SEC's aggressive stance against crypto has previously caused waves in the market as investors are uncertain of the future of crypto in the US. However, following the collapse of FTX, prices for many cryptocurrencies dropped drastically as investors sold off holdings due to uncertainty.
Certain world events like world wars or Covid-19 also affect the price of cryptocurrency. This is because events like COVID-19 or world wars cause uncertainty, which can negatively impact the price of Bitcoin and other cryptocurrencies.
Like any other market, competition affects the price of cryptocurrency because almost all the coins claim to do the same thing. While Bitcoin remains the number one coin, its dominance has reduced in recent years due to the increased awareness of and capabilities for alternative coins.
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