Some of the External Factors That Affects the Value of Cryptocurrencies in the Crypto World
As far as cryptocurrency is concerned, there are a number of different factors that can affect the value of cryptocurrencies. In other words, there are some external factors that causes the increase or decrease of any cryptocurrency asset. With that, it is very important to understand the various factors that affects the value of cryptocurrencies so as to make better investment or trading decisions. This knowledge helps in making proper fundamental analysis, technical analysis or sentimental analysis before making any investment or trading decision. Some of the factors are;
Demand and supply
When a cryptocurrency has a higher demand than the supply of the cryptocurrency, then the value increases. Similar to coins that have very low max supply, the prices most likely will be high because the demand is higher than the supply. When the supply of a cryptocurrency is low, and there is a high demand, then value increases. The supply of a cryptocurrency can be reduced by burning the cryptocurrency which can also help increase the value of the cryptocurrency.
Social media
Social media is a big factor that can affect the value of any cryptocurrency. We are in an era dominated by social media and according to statistics, there are millions of users who are using social media on a daily basis. Because of the popularity and high number of social media users, any post on social media can have a massive effect on the value of cryptocurrency. Elon Musk Dogecoin tweets on twitter is a big example of the effect of social media on the value of a cryptocurrency.
Dogecoin rose from less than a cent to over $0.60 all because of Elon Musk. Also, if there is a negative sentiment on social media about a cryptocurrency, it can cause a lot of FUD which can make the value of a cryptocurrency to fall. If the sentiments is positive, it can as well cause fear of missing out which can make the value of a cryptocurrency to rise.
Policies and Regulations
Government policies and regulations can affect the value of cryptocurrencies especially if it comes from the top rated countries like United states of America. When policies and regulations are against cryptocurrencies, it can cause people to FUD thereby leading to people dumping their holdings in fear of losing everything. The massive dumping can cause the value of a cryptocurrency to fall.
Big exchanges listing
When it comes to factors that can have a great impact of the value of any cryptocurrency, big exchange listing play a huge role. Anytime a big exchange announces that it is going to list a particular coin, that coin always appreciate in value. Coinbase is a typical example of how exchange listing can positively affect the value of a cryptocurrency. Whenever coinbase announces that they are going to list a particular coin, that value spikes up immediately and from there goes on to sometimes 5x its value.
Big investors and institutions
When the big investors and institutions enters the market and begins to buy a particular cryptocurrency, the value of that cryptocurrency always goes up because of the money that is pumped into the market which clears up the cheap coins, making the value of that coin to increase. We have seen big investors and institutions investing in bitcoin and ethereum which has resulted in the value of bitcoin and ethereum to increase.
