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<p>Because of its decentralized nature, cryptocurrency, unlike fiat money, is not backed by a central financial authority, such as a bank. A bank can influence the value of a currency and increase the trust of its users, ultimately affecting its value. This approach does not work for cryptocurrency. So, how is the market price determined and what factors affect cryptocurrency price? The value is influenced by the following factors:</p><ul><li>Supply and demand</li><li>Competition</li><li>Media</li><li>Cost of production</li><li>Regulation.</li></ul><h2 id="header-0">Supply and demand</h2><p>☝️The basic economic principle of supply and demand applies to all market products. It is the main driver of the cryptocurrency price.</p><p>So, how does a cryptocurrency gain value? It increases in price when demand exceeds supply. Conversely, when the supply of tokens is high and the demand is low, the value of a cryptocurrency falls. However, the crypto has its own &#34;buts&#34; and one of them is the limited supply, i.e. a limited number of tokens.</p><p>&#x1f525;The combo of limited supply and the popularity of the cryptocurrency (its demand) generates its high price.</p><p>For example, <a href="https://www.coindesk.com/price/bitcoin/" rel="noopener noreferrer nofollow">bitcoin supply is limited to 21 million</a> (which is not the case with dollars). Today the total supply of bitcoin is equal to about 19 million and is thought to <a href="https://www.statista.com/statistics/326707/bitcoin-price-index/" rel="noopener noreferrer nofollow">run out by 2040</a>. Also, the bitcoin protocol only allows new coins to be generated at a fixed rate that slows down over time.</p><p>Limitedness is not common to all cryptocurrencies: for example, Ethereum (ether) has no limited supply.</p><p>☝️​​So, how to calculate crypto price (or its approximate value)? Check its supply/demand ratio.</p><h2 id="header-1">The complexity of production</h2><p>New coins are produced through a mining process. In the case of proof-of-work (PoW) consensus, this process requires significant resources in the form of electricity to maintain the computing infrastructure (processors, servers, etc.). The emergence of new coins is also possible via other consensuses, such as proof-of-stake (PoS), for example. In this way, the resource costs are much lower than in the first case.</p><h2 id="header-2">Competitiveness</h2><p>The entry barrier to new tokens is quite low, leading to more and more new crypto players springing up.</p><p>Competitiveness affects the prices of all market players. Therefore, the entry of a product with more robust functionality the competitor can offer can make users switch their interest to the newcomer, causing more demand and, consequently, a higher price.</p><h2 id="header-3">Media hype</h2><p>One of the ways to promote your product is to use networks and popular forums, news publications and other information sources.</p><blockquote><em>The more good news and reviews, the better for the cryptocurrency &#61; the more people know about the cryptocurrency&#39;s existence in a good way and, moreover, use it, the more chances the cryptocurrency can rise in value.</em></blockquote><h2 id="header-4">Regulation</h2><p>Increased interest from users of a particular country causes increased interest from its government authorities. However, while <a href="https://www.thomsonreuters.com/en-us/posts/wp-content/uploads/sites/20/2022/04/Cryptos-Report-Compendium-2022.pdf" rel="noopener noreferrer nofollow">some countries ban crypto</a>, others are becoming crypto-friendly.</p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/24ab2d8c21a740b1bd081e71eb673b30.png" /></p><p><a href="https://oneart.digital/en/blog/payments-taxes-tax-havens-your-crypto-regulation-guide" rel="noopener noreferrer nofollow">Crypto regulation around the world</a> remains an unresolved issue. There is no single authority, but each country makes its own rules regarding the use of crypto and tax imposition.</p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/b1d72db8126e44e9bef884f09cfd1596.png" /></p><p>Typically, restrictions can negatively affect the demand for a particular cryptocurrency, leading to its reduced price.</p><p></p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/d91611757bec427eb11e8222ff46c52f.png" /></p><p><em>Image source: Statista<br /></em></p><h3 id="follow-official-oneart-channels-to-find-the-latest-info-and-updates">Follow official OneArt channels to find the latest info and updates:</h3><ul><li><a href="https://twitter.com/art_wallet" rel="noopener noreferrer nofollow">Twitter</a></li><li><a href="https://t.me/art_wallet" rel="noopener noreferrer nofollow">Telegram Group</a></li><li><a href="https://t.me/artwallet_official" rel="noopener noreferrer nofollow">Telegram Announcements</a></li><li><a href="https://coinmarketcap.com/community/profile/OneArt" rel="noopener noreferrer nofollow">CoinMarketCap Community</a></li><li><a href="https://www.linkedin.com/company/oneart/" rel="noopener noreferrer nofollow">LinkedIn</a></li><li><a href="https://www.youtube.com/&#64;oneart5089" rel="noopener noreferrer nofollow">YouTube</a></li></ul>

How is Crypto Price Determined?

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Alte articole publicate pe 15 dec. 2022

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