6 Factors that Can Affect Cryptocurrency Price Fluctuations

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The number of people that want to invest in different cryptocurrencies is growing. However, that number is still not big enough. There are many people that hesitate to do that because they are not sure whether that investment will pay off in the end.

First of all, even if you start a business in a web development industry (many consider it profitable), that doesn’t mean you will become rich. Things are the same when we talk about the crypto world. Your success depends a lot on your knowledge, skills, and ability to predict certain things.

Another reason why people are afraid to invest in cryptos is the lack of reliable pieces of information. It is not a secret that the price of digital currencies is constantly going up and down. Okay, this may not be the case currently when we talk about Bitcoin. However, when you check out the past of the most popular crypto, you will easily notice how turbulent it is.

That is the reason why we decided on writing this article. Multiple factors can affect cryptocurrency price fluctuations. Understanding them is important because of two different reasons – you will make better investments in the future, and you will defeat the fear of uncertainty that you currently have. So, let’s go!

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  • Support of the Media

The influence television, social media, and the online world, in general, have on people is too strong. Because of that, whenever crypto gets support from media, you can expect to see its value will grow. People will believe the news they hear on TV is some sort of tip that can help them improve their income in the future.

However, we are not talking here only about mainstream media. As you know, social media networks are full of influencers that people follow every single day. If one of those influencers decides on promoting a cryptocurrency, the most loyal fans won’t hesitate to invest because they trust those individuals.

  • Rumors

We will continue in the same manner. Why do you think that everything you read online or hear on the news is going to be correct? We are living in the world of fake news that can destroy the reputation of everyone for a couple of seconds.

This is a tactic that many crypto investors are using. They spread fake news about their competitive crypto and try to cause additional uncertainty among the investors. When people hear that the value of their favorite digital currency will go down soon, they will sell it in order to protect their money.

So, what exactly this means for you? It means that you need to carefully choose the source of information. Not all crypto news portals have the credibility to talk about something. The same rule counts for the individuals that have a strong influence on society.

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  • Demand and Supply

As previously mentioned, Bitcoin is breaking records almost every single day. Its value is growing in the last couple of months continuously, and there are no signs the same trend won’t continue. So, why exactly this is happening?

Pandemic messed up the plans of the entire world. Many small businesses had to stop working because of the new normal. Because of that, investors and entrepreneurs started to look for a place that is not directly connected with the worldwide happenings. Bitcoin (but also some other cryptos) seemed like an excellent option, and its demand started to grow since the end of 2020.

The demand is a crucial factor that affects cryptocurrency price fluctuations. When people are looking to invest in something, its price automatically jumps. On the other hand, if the popularity of crypto starts to go down, its value decreases. We already highlighted two reasons above why both scenarios can happen.

  • Regulations

Another reason why people did not invest in cryptos earlier is the crypto laws and regulations. More precisely, the regulations did not exist before, and many people were using them for money laundering, and other criminal activities.

Yet, things are different now because more and more countries are recognizing digital currencies as a legit payment method. Let’s imagine that only one country regulates all crypto transactions. This means that a new group of people will potentially invest in cryptos which will raise the demand for cryptos.

On the other hand, it is not the secret that some countries around the globe banned Bitcoin and other cryptos. For instance, a good example of that is China. This country plans to make a digital currency based on the national currency. However, when they banned cryptos for trading, a lot of people there lost the opportunity to invest. Despite that, many people from other regions started to feel uncertain. They didn’t know whether their own country will decide on that move. Logically, that directly affected the value of every single crypto.

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  • The Costs of Production

You should know that the costs of production were not always the same. First of all, not all cryptos are producing in the same way. Despite that, people are not using the same types of devices to mine. In the end, the electricity fees also experienced ups and downs for many reasons. All these factors influence the total price of production, and that automatically affected the crypto price.

  • Competition

Last but not least factor that influences the crypto price fluctuation was definitely competition. In general, there are thousands of cryptos in the world. Of course, not all of them become competitive; some of them simply stopped existing because the demand was too low. However, whenever crypto becomes stronger, it becomes attractive to many people. That is the reason why people sometimes sell one crypto or simply exchange it for another one. Logically, that type of selling and trading directly affected the price change of particular digital currencies.

  • Final Thought

As you see, there are many factors that influence cryptocurrency price fluctuation. Because of that, you need to make in-depth analyses all the time and ensure that you are making smart decisions.

The good news is that we are living in the 21st century, and technology can be quite helpful. All you have to do is to use different crypto apps. These apps use an algorithm that predicts certain changes on the market. If this seems like a legit option for you, we recommend you click here. It is much better when you have the assistance of technology on your side.

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