Factors That Affect Crypto Prices

 

Crypto prices are notoriously volatile, meaning that they can swing up and down dramatically within a day. This volatility is what makes cryptocurrencies exciting, but it can also pose challenges when it comes to determining the fair market value of a coin.

The price of a cryptocurrency is determined by the laws of supply and demand. When the amount of a coin being supplied matches the amount demanded, the price stays stable and brings about equilibrium in the market. Until then, the market’s volatility will persist, raising risks for traders while also providing higher rewards for them.

As a result, it’s important to understand the factors that can affect a crypto’s price. Aside from the usual ones, such as speculation and investor sentiment, there are some unique elements that can influence a cryptocurrency’s price.

One of the most influential factors is the overall economic environment. As a general rule, when the economy starts to slow down, consumers will spend less and a currency’s price will decline accordingly. This is exactly what happened to the top two most valuable cryptocurrencies, Bitcoin and Ethereum, in 2021, which lost nearly three-quarters of their value.

The second factor is the amount of coins available. what is crypto mining While some cryptocurrencies, such as Bitcoin, have an unlimited supply, most have a maximum and circulating supply that limits how many can be produced. If the demand for a specific coin increases, this will increase the circulating supply and push up the price. Similarly, if a new cryptocurrency gains popularity in the media and gains more awareness, its price will also go up.

Lastly, the price of a crypto can be influenced by its utility. If a crypto is being used as a means of payment or to store value, it can add or lose its value depending on the quality and quantity of the goods and services being exchanged. If the crypto was earned as income, it can have its value adjusted based on its tax implications.

To calculate a crypto’s fair market value, you can use the INET model or a number of reputable crypto price indexes. While using multiple sources for valuation purposes can be helpful, consistency is key, as jumping between different exchanges or price indices can lead to inconsistencies.

To help you stay on top of your game, you can find historical price data for all 28900+ cryptocurrencies on CoinCodex. You can select a custom time frame, data frequency and currency to get an in-depth overview of any coin’s history. This information can be particularly useful if you’re trying to determine the fair market value of a specific token. To start, simply head over to the “Historical” tab for a particular coin and click on the chart. You can even export the data to your desktop if you want to further analyze it.