In the volatile world of cryptocurrency, the values of coins can fluctuate significantly within very short periods. Depending on the coin and market in question, this volatility can be for good or bad reasons. Generally, coins may rise in value because of news and announcements such as a new partnership, an about-to-be-released software update, or a planned fork that will give users more control over their funds. Also, they may see their value decrease because of a whale selling their tokens or negative media attention. Whatever the reasons, understanding why the value of cryptocurrency changes can help you make better investment decisions moving forward.
Due to its decentralization factor and volatility, many individuals did not believe in cryptocurrency in its earlier days. Today, many businesses and corporations have included crypto in their payment options list. Aside from trading and purchasing this digital asset, you can also use it to buy actual goods. Some betting sites even accept cryptocurrency as a financing and payment method, allowing you to use it to fund your betting account and wager on any game, including card games, slots, cricket, football, and more. Parimatch football betting site in India is one platform where you can wager on football or any other game of your choice.
However, the volatility in the crypto market is one of the reasons why it appears risky as an investment. Sometimes, in just a matter of hours or even minutes, a trader can make a fortune or lose a substantial amount due to the wild fluctuation of the crypto market. Even coins with long track records and resounding user adoption can suddenly see their value rise or fall by double-digit percentages in a single day.
For instance, the crypto market has sustained some major hits in recent times. The value of many leading cryptocurrencies has decreased, and investors are concerned about the future of this market. Many experts have cited various reasons for the decline in value, including market manipulation and over-exposure to the general public. However, the current state of cryptocurrency may be beneficial in the long run because, when it comes to crypto, you cannot entirely predict the future. While these volatile price fluctuations may bring about losses for many people, many investors devise means to make profits from it.
But what exactly causes these wild fluctuations? It turns out there are several factors that influence the value of your tokens. In this article, we will look at some common reasons why the value of cryptocurrency rises and falls.
Activity on the blockchain
Every cryptocurrency supply is generated either through minting (putting more into circulation) or burning (sending the coin to an untraceable destination). Essentially, the methods used to govern each currency are exclusively decided by the team in charge of the project. However, some tokens, like Bitcoin and Ethereum, have a set rate of increase because there are only so many coins available.
One factor influencing the price of a crypto token is the various activities of several project owners and holders on the blockchain. The value of a cryptocurrency is majorly determined by the changes in the demand and supply graph. Essentially, a coin’s price will often increase if its demand rises and supply is limited.
There is a lot of competition.
Due to the multiple currencies launched into the system regularly, the degree of competition in the cryptocurrency market is extremely high. The new coins occasionally draw attention to themselves, especially when performing well. This has an impact on the value of the old currencies. For instance, a new crypto project making waves might result in less demand for an old token, lowering its value. However, it’s noteworthy that some of these new currencies tend to lose value over time and never recover, while others continue to trade at record levels for extended periods.
Periodic security concerns
The simplicity of interaction between two parties via a highly secured and decentralized system is one of the main benefits of the cryptocurrency market. However, it has been noted over time that the Decentralized Autonomous Organization (DAO), though safer than most finance systems, also faces specific security concerns. These may include phishing attacks and the fabrication of bogus cryptocurrencies, which occasionally require the operation of the Securities and Exchange Commission (SEC).
News and speculations
Volatility is the term used to describe the swift and unpredictable rise and fall of an asset’s price on the market, which is influenced by several factors. These movements may be in profit or loss. News and speculations are the most influential factor in causing volatility in the cryptocurrency market. One post from a renowned crypto whale or influencer can bring massive attention to a particular currency, positively or negatively. Depending on what is said in such a post, the price of the currency may increase or decrease significantly.
It has no actual worth.
As a digital asset, cryptocurrency has no history of dealings with banks and is entirely independent of any financial organization. It is a decentralized system with a collection of computer codes used to make safe payments globally; thus, it has no inherent value and is unbacked by any institution. Due to its independence, the rise and fall of any digital currency have no impact on the financial system of any nation. However, the value of a nation’s currency can alter the amount of crypto that can be purchased with it.
Volatility is a term strongly associated with cryptocurrency and a reason for many fears regarding the market. However, the price fluctuation of cryptocurrencies is what many investors capitalize on to profit from the market. Overall, the crypto market is all about profits and losses, depending on upward and downward swings in the value of digital currencies. Don’t forget to check out Parimatch for a better and more efficient way to place a wager on your favorite sports.