Ever since the inception of cryptocurrency, it has continued to show positivity in terms of relevance. Indeed, certain tokens have come and gone but cryptocurrency itself remains an indomitable phenomenon. It has pierced through different industries and has expanded into fields to become a widely recognized currency.
However, one must understand that there are periods of crisis in core industries like tech and computer industries. Some of these crises are even visible in our present times today. Yet, despite the crisis at hand, crypto is still faring well today.
What gives crypto the power to keep rising? Continue reading to learn more about how cryptocurrency prices work and why they continue to rise.
What Gives Bitcoin and Other Cryptocurrencies Their Worth?
The cost of digital currencies around the globe are determined by a variety of variables.The following is a list of the factors that have a direct impact on the prices of these coins today:
Supply and Demand
Much like the worth of any other commodity, crypto is subject to the laws of supply and demand. The cost of something goes up if its demand rises quicker than its supply. Virtual currencies, just like every other asset, are susceptible to demand as well as supply laws. When there is a greater desire for a cryptocurrency than there is supply, the price of that cryptocurrency increases.
Every cryptocurrency’s supply method is public knowledge; projects publicize their coin minting and burning schedules. Some, like Bitcoin, have a limited quantity. It’s public knowledge that at any particular time, not more than 21,000,000 Bitcoins will ever be in existence. As for others, like Ether, there is no set limit on production.
There are mechanisms in some cryptocurrencies that “burn” off current tokens to limit the total number of tokens in circulation. Token burning is sending the asset to an immutable blockchain address. This helps to keep inflation minimal.
Each coin has its own unique monetary strategy. Every time a block is added to the blockchain, the total number of Bitcoins in circulation grows by a predetermined sum. Ethereum not only provides a set payment per mined block but also rewards miners for consolidating “uncle blocks” into a new block. This implies that the pace of increase in volume is uncertain.
Interest can rise as people learn more about an undertaking or as its value grows. The rising appeal of a crypto asset as an investment leads to greater thirst for it. This also has the impact of decreasing the currency’s quantity in circulation. For instance, Bitcoin’s price increased dramatically in early 2021 after big investors began purchasing and keeping the cryptocurrency. This was because demand greatly exceeded supply, resulting in a steep rise in the price of a single Bitcoin.
Bitcoin and Ethereum, two of the most popular coins, are traded on a number of different platforms. These most widely used coins can be found on nearly every cryptocurrency market. However, some smaller coins may only be listed on certain platforms, making them unavailable to a wider range of potential buyers.
Moreso, some wallet providers will charge a commission to collect quotations for swapping any given group of coins across multiple exchanges. This even makes the matter worse.
Furthermore, the spread the exchange takes may be unacceptably high for some buyers if the coin in question has low relevance. There may be more demand for a coin if it is published on more exchanges. This will broaden the net of prospective purchasers. As a result, with all else being equivalent, a rise in demand will result in a corresponding increase in price.
Laws and Regulations
There is a lack of clarity regarding who should oversee the trading of coins. The Commodity Futures Trading Commission (CFTC) deems virtual currencies to be commodities in the same way that coffee or gold are. Similarly, the Securities and Exchange Commission (SEC) classifies them as assets in the same way that stocks and bonds are.
As such, neither can assert governmental primacy over bitcoin trading platforms. A definitive decision could increase transparency, boost cryptocurrency values, and pave the way for more broadly traded crypto-related financial products.
Cryptocurrency trading needs to be facilitated by less onerous regulations. When more people can buy and sell bitcoin through derivatives like ETFs, the market price rises. In addition, if cryptocurrencies were regulated, buyers could use futures contracts and options to speculate against the market. That should lead to more accurate price findings and fewer wild swings in the cost of cryptocurrencies.
The desire for cryptocurrencies may be hurt by government regulations. The value of cryptocurrencies could fall if authorities make adjustments to the regulations that discourage cryptocurrency investment or use.
Bitcoin networks are notorious for not sticking to a rigid set of guidelines. Developers make modifications to the project in accordance with suggestions from customer base. Holders of certain tokens, known as administration tokens, have a say in the project’s fate, including the mining and use of tokens. Hence, token administration adjustments require agreement from all parties involved.
For example, Ethereum is shifting to a proof-of-stake system from the proof-of-work it previously used . Much of the expensive mining equipment in data centers or personal basements will become outdated as a result of this change. Consequently, Ether’s value is bound to fluctuate.
Moreover, governance stability is a key factor in attracting investment. If a coin has been around for a while and isn’t perfect, buyers will still choose it over a completely unknown alternative. As a result, stable administration can be beneficial. It leads to more stable pricing in cases where changes are comparatively difficult to implement.
However, the sluggish pace at which software is updated to better protocols can cap a crypto price increase. If a necessary upgrade that would benefit cryptocurrency holders would take months to implement, the present owners would suffer.
Cost of Production
There is a procedure known as “mining” that generates new cryptocurrency coins. Using a machine, miners confirm the validity of the blocks on the blockchain in order to obtain new money. Cryptocurrencies are made possible by their autonomous network of processors. The protocol generates tokens of a cryptocurrency as payment to these miners.
Computing capacity is needed for blockchain verification. Participants spend a lot of money on resources like energy and specialized hardware to “mine” bitcoin. Proof-of-work systems make it harder to generate a cryptocurrency the more people are trying to do it at the same time. This is due to the fact that miners compete to validate a block by solving a difficult mathematical issue first. Costs associated with mining go up because more potent machinery is required.
Hence, the worth of cryptocurrency must rise in tandem with the expense of mining. Miners will quit attempting to mine coins if the worth isn’t equivalent to the cost of mining it or there is no profit to gain. Since miners are required for the blockchain to operate, the price will rise. As long as there is interest in doing business on the blockchain, the price will rather rise than stop mining.
Every day, new cryptocurrency initiatives and coins are introduced, making the total number of cryptocurrencies in circulation into the thousands. New rivals face a low barrier to entry, but success in the bitcoin market requires more than just a good idea. It requires a critical mass of consumers.
A cryptocurrency app that solves a problem that other apps have is more likely to gain traction among users. If an ambitious contender gathers momentum, this will chew into the existing player’s market dominance. This will drive down the price of the incumbent’s coin while driving up the price of the challenger’s.
3 Reasons Crypto Prices Are Rising Today
We’ve seen the factors leading to that affect the general prices of crypto in the market. Now, there are crises in recent times and the prices of crypto are expected to plummet. Still, it surges forward. Let us now look at the reasons why the price of crypto today keeps going up:
Circle Has Calmed the SVB Crash Anxiety
Millions of USDC users have watched the depeg of Silicon Valley Bank in recent days with hopeless resignation. This unfortunate crash has shaken the grounds of history.
However, today, the FDIC started selling SVB properties in order to refund up to 50% of SVB depositors’ money. The worried investors can finally have a breath of fresh air.
Circle’s vulnerability to the Silicon Valley Bank problem was tweeted about, leading to the depeg. The industry was thrown into brief chaos as investors rushed to withdraw their money from USDC. Its value plummeted to as low as $0.87 as a result. This weekend, however, USDC made a repeg, rising to a level near $0.99.
The Worst Sell-Off Move is Over
Price action in Bitcoin (BTC) has been stifled by heavy sell pressure for almost a month. Despite repeated attempts to breach upward to re-test $25,000; however, it appears that the worst may be over.
According to data from On-Chain, Bitcoin has experienced a positive influx onto exchanges for the past 25 days. When this happens, traders and buyers know it’s time to liquidate their Bitcoin holdings on the market.
A clear accumulation indication was seen recently, as the net position shift at major exchanges flipped from net inflow to net outflow. This suggests that the sell-off may be over.
Bitcoin Stands its Ground in Intense Security
The final reason to be optimistic about crypto markets this week comes from the acceptance of the Bitcoin SHA-256 network. This network is presently the largest it has ever been.
This is a record high for the SHA-256 hash rate. It is a gauge of the total processing capacity being applied to the Bitcoin network.
Good news for crypto investors – be calm and stay put. From all indications, crypto investment is still safe and can be used for several purposes such as online crypto gambling, shopping, trading, and many more. If it can survive this moment of intense heat, let’s believe there’ll be nothing to worry about.