How are cryptocurrency like Ethereum prices are decided?
What controls the price of cryptocurrency?
Cryptocurrency prices are decided through factors like
In this article, we are going to discuss all the points in detail, And see how
this factors Cryptocurrency prices.
Before Moving forward we will have a quick recap on what Cryptocurrency
is?
Cryptocurrency is basically a type of digital currency. Remember do not
confuse that they are both the same. Cryptocurrency is just a part of
digital currency.
Well, Cryptocurrency transactions are not recorded by any financial
institution unlike money which is deposited in the bank and can be used by
Netbanking. Crypto transactions are recorded on the blockchain and are not
verified by any financial institution like a bank and Cryptocurrencies can be
exchanged with other users directly.
There are Several Cryptocurrencies like
As we discussed earlier Cryptocurrency prices changes due to a lot of
factors which we are going to discuss in brief and see how prices change. We
can see the price change from world coin index.
1. Supply
Just like any other product Crypto price depends on the supply of
cryptocurrency.
For example:
If the supply of any product
increases and demand is less the price of that product gets decreased and If
the supply of any product decreases and demand is higher the price of that
product gets increased.
The same is what happened with crypto if supply increases the price of that
particular cryptocurrency decreases similarly, if the cryptocurrency supply
decreases the price gets increased.
Similar to any other commodity with demands increases if people want it more it
depends upon many factors. In the case of crypto, it may be the government
policy on a particular cryptocurrency. For example, if the price of tax on
Bitcoin increases people may not like to buy Bitcoin which may decrease the
demand for Bitcoin.
2. Cost Of Production
The cost of a production place is important in deciding the price of any
commodity. Likely new cryptocurrencies are produced through a process called
mining this process is very expensive as it requires a lot of expensive
components like video graphic cards which are very expensive due to
their increasing demand, which increase the price of cryptocurrency as the
cost of production is very high. It also has electricity in order to mine. And
due proof of work system used by many cryptocurrencies is like Bitcoin and
Ethereum, the more competition increases it becomes difficult to mine.
As mining cost increases miners don't mine crypto with less value as it may
not cover their cost of production which directly affects the demand for
particular cryptocurrency.
3. Availability
It is one of the reasons for inflation or deflation in cryptocurrency prices.
Availability means the difference between how much a particular cryptocurrency
can be mined
And how much of it is already mined. For example, Bitcoin is limited to be mine
at 21 million due to its Bitcoin protocol
and nearly 19 million Bitcoin is already mined till date.
It makes Bitcoin prices go higher.
4. Demand
Supply and Demand are both connected to each other. As we see if demand is
higher and supply is less price will be increased
when the decentralised finance project got launched on Ethereum the demand for
Ethereum got increased which made the price got higher in the chart.
Accessibility and transparency of currency made it a good asset to invest in. Which
increased the number of buyers and the price of crypto.
Government rules
It Played an important factor in determining the price of the cryptocurrency.
Government policy in India which said 30% of any crypto transaction will go to
the government, which made a lot of people think before investing in crypto
which certainly decreases the demand for crypto.
Conclusion
Cryptocurrency prices are very volatile because of the above factor there are a few more factors too affecting crypto prices but these are once affecting How are
cryptocurrency like Ethereum prices are decided?.
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