If you are planning on investing in cryptocurrencies, it will be beneficial if you take out some time to get yourself acquainted with what affect their prices.
Cryptocurrencies such as Bitcoin, Etherium and Ripple are highly susceptible to price volatility with the news spreading like wildfire. A times price could fall and rise upto 30% or more within a couple of days (even hours). Many factors affect the price of cryptocurrencies and they include:
Cryptocurrency Regulation: This relates to rules and regulations designed to guide the development and use of cryptocurrencies. Questions are being raised in different countries and regions on issues relating to whether cryptocurrency should be recognized as a unit of currency, tightly regulated and even made illegal. In this respect, new decisions are being made and changed from time to time, and prices react quickly to any decisions regarding cryptocurrency regulation. For example, in April 2017, the price rose by 3% in a day when Japan announced that it was legalizing Bitcoin. Conversely, in February 2018, Bitcoin and Etherium price dropped by 15% and 20% respectively when China blocked all websites relating to trading in cryptocurrencies.
Current Affairs: Many crypto enthusiasts view cryptocurrency as an alternative to “fiat” currency — that is, currency whose value is backed by the government who issued it. In the event of political and economic uncertainties, investors lose confidence in a fiat currency, and would turn to cryptocurrencies, pushing up the prices.
Speculation: Speculative investors hope to make gains from cryptocurrencies, but they often buy and sell quickly, adversely affecting the market or causing short-term price swings.
Hacking: From the beginning of Bitcoin to the emergence of new currencies today, hacking has remained a problem for cryptocurrency investors. When a crypto exchange or wallet is hacked, price swing is provoked. For example, when the crypto exchange Binance was hacked early this year, Bitcoin price dropped by 10.8% in a matter of minutes.
New Currencies: The proliferation of cryptocurrencies has a diluting effect on the entire market. As new coins are launched, money flows from existing currencies to the new ones, thereby depressing the prices of existing currencies. To benefit maximally, careful research is needed.
Crypto News and Updates: The crypto landscape is made up of different projects. Development teams continually make progress in the development of a particular coin, and keeps updating investors. Each time there is an update or news release regarding the progress of the currency, price usually rises.
In addition to these, it is equally important to look for other factors that may affect the price of cryptocurrencies to enrich your intellectual base.