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7 Key Factors Influencing Cryptocurrency Value
Cryptos can rise, but they also have the potential to fall. Like, right down. Here are some factors that affect crypto prices.
What factors influence cryptocurrency value? Demand is the first thing that comes to my mind. The demand is the most important factor. There are many factors that influence the price fluctuations of cryptocurrency. We’ll be looking at these factors in detail in this article.
7 Factors That Affect Cryptocurrency Prices
Here are seven(7) elements that may influence the value of cryptocurrency:
1. Node Count
Node count is a measure of how many active wallets are present in a network. This information can be found by doing a Google search or looking at the currency homepage.
How is node count so important? It shows how strong the community is. A high number of nodes is a sign that there is a strong community. This increases the chance for the currency to survive a crisis. A large number of nodes can also be a sign of strength and decentralization in a network. These are important factors when it is to crypto prices.
Note: The node count can be used to determine if a cryptocurrency’s price is fair. Compare the node count and total capitalization of the currency to see if they are comparable with other currencies. This method doesn’t give you an exact picture of cryptos as the network infrastructure can vary, but it will give you an idea about how they work and how price can be affected by node counts.
2. Production Cost
Another factor that affect crypto prices is the production cost. Miners use special hardware and servers every day to verify transactions on the network and produce new tokens. For their efforts, miners receive virtual tokens and a network charge.
Decentralized cryptocurrency can continue to work because of the network activity of miners. The cryptocurrency value could also rise if mining costs go up. If the profits aren’t enough to pay the expenses and make their money, it makes no sense to mine cryptocurrency tokens. This is not always true and it isn’t consistent across cryptos. So make sure you do your research before making a commitment.
3. Crypto Exchanges
A token that is readily available on many crypto exchanges will increase the number of people who buy and use it. You will need to use two or more exchanges in order to swap any cryptocurrency token. This increases the investment cost.
There are many cryptocurrencies in existence, and new ones are being created every day. There are meme coins and celebrity coins. These new coins could also be used to create strong user networks and overcome current limitations.
5. Government Regulations
Some governments don’t appreciate cryptocurrency’s unregulated and decentralized nature, so they look for ways to regulate the crypto market.
To control crypto, the easiest way is to tax any fiat money used to cash out coins. This tax would only apply to certain tokens. People who want to cash in their profits can use another coin.
Many countries decided that banning Bitcoin, Ethereum and other coins was the best way to manage the crypto market. It is a bad idea to set new regulations that prohibit cryptocurrency in a country with many crypto users. This will adversely impact the currency’s value.
However, some countries like Japan are using blockchain technology and have developed a national cryptocurrency to allow more people to use virtual tokens.
Theoretically, as there is less cryptocurrency supply, the price of coins will rise. The price of coins that are only 40% in circulation, and 60% reserved, may drop if more coins are available.
Some cryptocurrency projects “burn” coins and send them to an inaccessible address within the blockchain. They can control the supply.
7. Social Media
Social media hype is known to cause cryptocurrency values to fluctuate. It works both ways. News can lower or raise prices. Influential people in the crypto community like Elon Musk have had a significant impact on the DOGE coin’s value many times.
Although social media can be chaotic, there is still valuable information. Crypto exchanges, for example, provide updates about blockchain currency and information about scams.