How Does the Price of a Cryptocurrency Change?

Cryptocurrencies, which are among the most discussed investment tools of recent years, have made investors who invested money in the right crypto asset at the right time very rich. However, it was not the other way around. Some crypto assets have disappeared from the markets over the past years. Others have not been able to travel a barley length for years.

So, how are the prices of cryptocurrencies determined? For example, how is it that Bitcoin can first rise to $ 60 thousand and then fall to the level of $ 15 thousand? In this content, we will take a closer look at how the prices of crypto assets change. Let’s get started.

What are the things that determine the price of crypto assets and lead to the ups and downs?

bitcoin price

The king of the cryptocurrency markets is undoubtedly Bitcoin (BTC). In fact, almost all cryptoassets today gain or lose value depending on Bitcoin in some way. If you examine the price charts of crypto assets, you will see charts similar to Bitcoin.

Therefore, when you invest, you should not only follow the price chart of the crypto asset you are investing in, but also the price chart of Bitcoin.

In the image above, you see the 10 largest crypto assets in the world. To the far right of the tab with Bitcoin is the price chart of this cryptocurrency for the last week.

If you notice, the price chart of all crypto assets is similar, except for dollar-linked stablecoins such as Tether (USDT) and USD Coin (USDC). The dominance in Bitcoin directly affects the value of other assets.

Supply demand balance

There is a supply-demand balance for almost everything that has money in the world. We can explain this expression in the simplest terms as follows: The more demanded an asset is produced over time, the more valuable it becomes. This is true from petroleum to toilet paper. As for crypto assets…

The maximum number of Bitcoins you can buy in the world is 21 million. When all of these Bitcoins, some of which are still encrypted, are in circulation, there will be no production of another Bitcoin. This situation can directly increase the price of Bitcoin if the demand is as it is now.

This is because high demand for an asset that is scarce causes the price to rise. The opposite is also true. There are trillions of crypto assets minted today. If there are not enough buyers for these, loss of value will be inevitable.

Failure to keep promises made

Every crypto-asset project is implemented to serve a specific purpose. Team; He writes what he will do in days, weeks, months and years in documents known as whitepapers. Everything written on the whitepaper is actually the words of the team.

If promises are kept and projects continue to be developed as intended, an environment of trust is established and the crypto asset gains value. The ultimate end of projects that act contrary to what is written in Whihepaper is extinction.

“Burn”, that is, burning processes

In the cryptocurrency community, there is a term called “burning coins”. This term means the destruction of a certain amount of crypto assets at a predetermined time. Burning transactions do not directly affect the price movement of the crypto asset, but are important for the supply-demand balance. Regular burning reduces the supply. An increase in demand will value the crypto asset.

Mining

Bitcoin is a cryptocurrency produced by mining. Miners who manage to decrypt the passwords earn Bitcoin as a reward. There is a balance here: There is a cost for mining cryptocurrencies (such as mining equipment and electricity).

The higher this cost, the higher the price miners will offer for sale. After all, cryptocurrency mining is not a charity. Huge facilities are established and profit is tried to be made.

media influence

You wake up one morning and you start seeing crypto assets talk on TV. Bitcoin prices, in particular, start to be talked about in the morning news or main news bulletins. After a while, you will witness that a few crypto assets such as Bitcoin are also being talked about.

At the end of the job, even the professional investors and even the neighborhood shopkeepers who have nothing to do with the event talk about crypto assets. This situation has a positive effect on prices. Pumping negative news about cryptoassets has the opposite effect.

Pump and dump movements

Sometimes a single large investor (whale) or a group of investors buys a single crypto asset. Sometimes this happens for a few days, sometimes for a few minutes. Large purchases lead to an increase in the price (pump). Sales lower prices (dump).

• Advice: Be you, don’t join the pump groups no matter what. In a matter of minutes, you can lose your entire existence. Because if you can’t sell at the right moment, you will lose with a 99 percent probability.

Whether the crypto asset works in real life

We have already mentioned that every crypto asset has a production purpose. These purposes are of great importance for the price of the crypto asset. If a crypto-asset starts to be used for shopping, gaming, art, or anything else everyday, know that it will go up in value.

However, crypto assets that appeal to a very small segment of the society or that will not really work will have difficulty in valuing.

Speculations

Billionaire businessman Elon Musk is one of the biggest speculators in the cryptocurrency community. Elon Musk has become such that every word that comes out of his mouth has a counterpart in the cryptocurrency community. Maybe you remember; WhatsApp made some controversial decisions for a while, and Signal, an alternative, was talked about a lot at that time.

Elon Musk made posts praising Signal and said that he invested in the platform. Thereupon, countless investors started to invest in a company called “Signal Advances” and increased their stock value 13 times. However, the company called Signal Advances had no ties to the mobile application Signal.

Such events, unfortunately, directly affect the prices of crypto assets. However, it should not be forgotten that this is a very big risk. Elon Musk, who flew Dogecoin (DOGE) with a word today, may cause investors to become DOGE enemies tomorrow. For safer crypto asset investments, it is useful to prefer those that are far from speculation.