A cryptocurrency is a type of digital currency that was generated employing encryption algorithms.

 Factors that Affect Cryptocurrency Prices 

What we all know about crypto?

Cryptocurrency, a type of digital currency operating on blockchain technology, was non-existent about a decade ago. Today, over 6,700 different types of cryptocurrencies are publicly traded demonstrating its popularity among investors and speculators alike.

But one intriguing issue is the fluctuation in cryptocurrency prices. With current (total) valuations of all digital currencies pegged at $645.7 billion, have you ever wondered what factors affect the cryptocurrency prices? Here, we discuss important factors that drive the cryptocurrency prices.

Now, the factors

v  Supply and Demand 

     One important factor affecting/influencing the prices of cryptocurrency is the supply-demand scenario. Increase in demand from end-users is what fuels the price value, higher the demand higher the prices and vice-versa.

v  Mining costs

     The cost of mining cryptocurrency influences its prices in the market. The cost of mining also includes the validation and the addition to the blockchain process. 

v  Legal issues

   There is no uniformity in regulating the cryptocurrencies around the world. Some countries are more receptive of the idea, while others have banned their use. The evolving rules and regulations to regulate digital currency impact cryptocurrency prices. 

v  Media analysis

   Sentiments drive the markets, and the media plays a pivotal role in creating market sentiment. Positive analysis, imparting knowledge on cryptocurrency and related news help in better understanding affecting the prices.

v  Financial volatility

    In case of any financial crisis, investors often flock to alternate places to park funds. One popular place to invest in the cryptocurrency market as the virtual market is insulated. The increase of participation results in fluctuation of prices of digital currency.

The final verdict

    Cryptocurrency is a speculative and risky asset to buy with multiple factors driving the prices. The volatility in the cryptocurrency prices is generally due to the above-mentioned factors, but other factors like manipulation by vested interests can not be ruled out. Cryptocurrency is not a uniformly recognized legal tender and hence needs caution to add to your portfolio. 

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