At this stage of the industry development volatility and cryptocurrencies are considered almost the synonymous. In this article we will talk about the factors that affect the fluctuations of cryptocurrency exchange rates and provide forecasts of the leading industry experts on the further outcomes.

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1. Key factors that influence the cryptocurrency price

The cryptocurrency industry, by virtue of its relative novelty and low popularity, at the current stage of its development still remains very much dependent on many factors. Here it is the list of the main ones:

Supply and demand ratio . The key law of economics which extends to absolutely any market is to be applied here. If the supply of the asset is limited and an increased demand occurs, the market responds with the growth of the price. This law is applied both ways.

Computing power (mining ). The initial code of Bitcoin and other coins is written in such way that the complexity of the network is also growing with the increase of participants’ number. The greater the complexity is the more computing power is required. This factor makes the rate grow.

Cost of electricity. Cryptocurrency mining, especially of such giants as Bitcoin, is rather a time-taking process from the energetic perspective. In order to mine the coins it is necessary to maintain faultless miners` work. In different countries the cost of electricity is quite high, which turns Bitcoin mining to absolutely unprofitable process. Therefore, the majority of farms are installed in the countries with low or medium price of electricity and a favorable climate.

State policy . Depending on the state gravitas on the world arena its policy is in direct proportion to the fall or growth of Bitcoin. For example, if Zimbabwe prohibits cryptocurrency on its territory, it will not cause any special damage to the industry, but if the same happens in the USA, China or Germany, it will incur an impressive rate correction of digital coins.

The technology that accounts for a coin . Do not forget that every coin is, first of all, a company that has its own product. Success and rate of any coin, accordingly, depend on the technology that accounts for a coin. If the developers were able to develop a really functioning technology that could be used by many people or other companies, then currency appreciation and market capitalization would be only a matter of time (Ethereum, Ripple, etc.).

Investors. The fact is that a large number of non-professional investors operate in the cryptocurrency market; many of them simply do not understand the reasons for the rate increase or correction. But there are also manipulators who use it and deliberately and artificially raise the rate of a certain coin (it is called pumping), after which they drastically dump their own assets and cause the rate to fall. This brings panic among traders, which increases this snowball and the rate rushes down.

News background . Mass media plays a fairly important role in the pricing process, as it can manage the supply-demand ratio. The better a news background is the more investors want to enter the market, which leads to a rate increase. Also in reverse, the more bad news is the more often non-professional investors dump their digital assets, which leads to a coin rate decrease.

Fraud . Unfortunately, a large number of scammers operate on the market, make use of the blind confidence of inexperienced investors and profit from this. This factor holds back a demand for cryptocurrencies.

2. Forecasts of leading experts

At the beginning of the summer, the experts from Trefis analytical company adjusted their own forecast about the real Bitcoin rate as of the end of 2018. Previously, they claimed that at the end of the year 1 BTC will cost not less than 15,000 US dollars. But in early June, they lowered the bar a little and set it at 12,500 US dollar. Thomas Lee, an analyst of Fundstrat Global Advisors, has analyzed the self-cost of the first cryptocurrency mining in the USA, which equals approximately 9,100 US dollar per coin, and come to a conclusion that Bitcoin rate as of the end of the year has to exceed at least twice the mining self-cost. In his opinion, by the end of the 2018 BTC rate will equal approximately 22,000 US dollar. Earlier he was talking about the amount of 25,000 US dollar. Michael Novogratz, a billionaire, as well as a fairly well-known Wall Street investor and now one of the largest ICO investors, claims that the price of the first cryptocurrency at the end of 2018 will grow to 40 thousand US dollar. To his opinion, this will happen due to the fact that institutional investors will merge their billions into the market. This will cause another bullish trend.

3. Conclusion

The market is still quite volatile and this trend is likely to be continued for more than one year. There are various forecasts according to which the price of the coin can either grow to 250,000 US dollars or up to 1 million US dollar, as well as fall to 1 cent. Each expert has his/her own mathematics, analysis and reasons to voice such figures. Therefore, there is no sense in believing in everything that is claimed even by famous people. Be guided only by your own experience. And the most important thing, do not invest more than you can afford to lose. Always think about risk management, otherwise it will cease to be an investment, and will switch over to the stage of gambling.