With crypto comes its uncertainty in the rise and dip of the market. To an untrained eye, these ups and downs may seem random. However, there are quite a few factors influencing the prices.
What influences the crypto value? It’s the demand! That’s why the majority of the best crypto signals telegram group use trading strategies like supply and demand to understand the ky areas of value before going into the trade.
The rarer in the market, the higher is the demand, and vice versa. Well, that’s not the end of the road. Let us take a closer look at some other vital stimuli affecting crypto values-
Node Count
It tells you the number of active wallets existing in one network. One can easily find this information by a simple google search.
So, how important is this node count?
Firstly, it shows you the strength of the community. A high node count means a strong community. Sturdy communities advance the options for that cryptocurrency to overcome any potential crisis.
Also, a high node count indicates the strength and decentralization of a network which are the two vital factors considered.
Production Cost
It is yet another factor that affects cryptocurrency. Miners use specialized hardware or services to produce new tokens and verify network transactions. In return, they are awarded virtual tokens and a network fee for their efforts.
The miner’s network activity helps in the working of decentralized cryptocurrency. The cryptocurrency value may increase with inflation in the cost of mining.
It would surely not make any sense to work on a new cryptocurrency token if there is no profit for their efforts. The expenses of mining new tokens should be met.
However, this isn’t always the case of cryptos and it isn’t uniform either.
Proper research is always advised before committing.
Government Regulation
Certain governing bodies do not appreciate the use of cryptocurrencies.
So, they tax people for any fiat money.
However, these taxes do not apply to every coin. So investors looking to cash out their profits can use a different exchange.
A few countries have even taken steps to ban Bitcoin, Ethereum, and a few other coins. It is bad news since a Nation with many crypto users is out of the crypto game. This negatively affects the value of a coin.
On the contrary, countries like Japan are encouraging blockchain technology. Rumour has it that they are developing a national cryptocurrency that might lead to people using virtual tokens.
Scarcity
Theoretically, if there is a limited crypto supply, the price should skyrocket, as fewer coins are in circulation now.
Say, 60% of the coins are reserved, and only 40% are in circulation.
Then there is a chance of a price drop when these coins are available to the buyers.
Some practices include “burning” existing coins by sending them to an unrecoverable address inside the blockchain that helps in controlling the availability supply.
Social Media
The effect on the crypto growth via social media can explain the outburst of Dogecoin by flooded tweets of Tesla CEO Elon Musk. Doge climbed up like anything due to the hype. Sadly, it did not last for long.
The social media hype is the reason behind the change in the value of cryptocurrencies. It also includes the impact made by recognized individuals.
You may say social media is the cause of all chaos and confusion. But it highlighted quite a few crypto scams in the media including updates on crypto exchanges.
Wrap Up
One should always do their research before investing in any coin. Owing to a plethora of factors to consider, invest in crypto only if you can afford to lose.
We highly recommend hovering over these 5 Key factors influencing cryptocurrency value before investing.
