Crypto 101: Why Does Cryptocurrency (Bitcoin, Doge) Rise And Fall?
-What is responsible for the rise and fall of a cryptocurrency, unlike regular fiat currencies?
-Why does Bitcoin keep rising and how much can it fall?
If you’re new to cryptocurrency trading and investments, you must the wondering what controls the value.
Why did bitcoin go from under $0.1 in value to over $40000 in 11 years? We’ve got an answer to your question. This article is going to introduce you to factors that determine how Bitcoin and other Cryptos are valued.
Supply and Demand
The law of supply and demand plays a major role in how cryptocurrencies are valued.
Use Bitcoin as an example. Bitcoin has a cap of 21 million. This means that only a maximum of 21 million bitcoins is ever going to be mined.
When the demand for Bitcoin exceeds the supply, (Bitcoin Mining) it increases in value.
Internal factors such as traders’ decision to buy or sell can cause the Cryptocurrency to rise or fall.
Global Acceptance
As major world businesses start to accept Bitcoin as a form of payment, it causes the value of the cryptocurrency to increase. A good example of this is Tesla purchasing bitcoin and working towards accepting it as a means of payment.
Media and Influence
Positive and negative reports by the media and other influential people can affect the value of a cryptocurrency.
We’ve witnessed this with Elon Musk’s posts about Dogecoin on Twitter driving the price up.
Political Events
Political events and major financial policies can affect the value of cryptocurrencies as well.
An example of this was China’s decision to ban ICOs causing the value of virtual currencies to tumble.
Read also: Five commonly use cryptocurrencies
Competition
The presence of one cryptocurrency keeps the value of others in check.
Apart from Bitcoin, there are over 1000 other cryptos in circulation. The value of Bitcoin would be different if the virtual currencies like Litecoin and Dogecoin weren’t available.
Bitcoin Price Affects Others
Since Bitcoin is the number one altcoin, other coins follow its movement.
This is because people are less likely to put money in other cryptocurrencies when the major one isn’t doing well.
Follow Naija.fm on our social media handles Facebook, Instagram, and Twitter to keep up with trending news, breaking news, entertainment news, and hot gist.
