We all know crypto is a highly unstable market where prices rise and fall in the blink of an eye. But people don’t know what affects the prices of cryptos. Well, there are many factors that affect the prices of cryptocurrency, and those are:
Demand and Supply
We all know the rule of demand and supply in the market. However, supply and demand control the prices of any asset in the market big time. Now, if the demand for any particular asset increases and the supply remains constant, then the price of the asset increases. On the other hand, if the demand decreases and supply increases, then the prices fall of that asset. It is the same with cryptocurrencies. If crypto has a high demand and limited supply, then the price will be huge. On the other hand, if the supply of any crypto increases but the demand remains constant or decreases, then the prices will fall off that crypto.
Another factor that affects the prices of cryptos is security. It’s a fact that both hardware and software are responsible for the security and price of the crypto. So, if you use the best software and hardware, then your crypto of your will have good security. And if the security is great and has a good name in the market, then people will recognize more of your crypto, and the price will rise since your crypto has a high level of security. But if your crypto has poor security, the people will also know about it, and people won’t accept that and invest in that, which will make the crypto prices fall.
The number of nodes is the best indicator that helps people to determine the affair price of the cryptocurrency. Now, the number of nodes states how many active wallets are located in that crypto network. However, one can see the info about the number of nodes from the homepage of that crypto website. And one can use that info of node and also see the market capitalization of that crypto, which will help them to determine if the crypto has a fair price or not.
The production cost of any crypto also affects the piece of the cryptos. I mean, the production determines that what will be the price of cryptos. We all know that cryptocurrencies are generated through crypto mining, and it is a very expensive process. That is because a miner will need lots of expensive equipment, a massive amount of electricity, paid hardware and software. It’s a very expensive process where you have to invest a lot to mine cryptos. And if the cost is higher, then the price will be higher as well.
Government Regulation and Tax
It’s a fact that if your crypto has to pay a higher amount of tax and follow way more regulations, then you will add that tax amount to the production cost, and you will determine the price by including the tax. Now, if the tax is higher, then the prices will be higher as well.