The crypto community is no stranger to price volatility. It’s not uncommon to see drastic price surges and dips within a matter of days. What exactly contributes to this roller coaster effect? In this post, we’ll examine some of the major factors that affect the price of cryptocurrency.

Liquidity

A cryptocurrency’s liquidity, or the amount of a crypto asset flowing through the market, affects its ability to remain resilient against big market movements. With fiat currencies like the US dollar, huge trade volumes occur every day without massively impacting the dollar’s value. With cryptocurrencies like Bitcoin, the volume is comparatively much smaller. A single trade event has the potential to create a bigger impact.

Current Events

While cryptocurrencies have yet to affect the mainstream, the mainstream has certainly had an effect on cryptocurrencies. From economic growth to political turmoil, real-world events weigh heavily on many investors’ decisions to buy and sell cryptocurrency.

Rules and Regulations

As governing bodies race to keep up with cryptocurrency development and adoption, we get to witness in real-time the effects on price. One thing is undeniable—prices will react quickly when regulatory decisions involve cryptocurrency.

Popular Opinion

Whether it’s from a well-recognized individual or a group, the power of speculation can drive up the price of an asset or push it down just as quickly. Cryptocurrencies are particularly prone to popular opinion, which is why we highly encourage thorough assessment.

Development

Let’s not forget there are interesting ideas behind cryptocurrencies! Development progress acts as a validating factor in a sea of projects that promise to create monumental change, and it doesn’t go unnoticed by the cryptosphere.

Attacks

While many of crypto’s most prolific hacks and attacks leveraged vulnerabilities in cybersecurity and centralized components, the headlines are enough to scare investors. News of an attack is usually enough to provoke a hit on prices.



There you have it—many of the major factors that play a role in cryptocurrency prices. However, as you may already know, there are currently thousands of cryptocurrencies out there—each facing a different set of challenges that can play a large role in determining their price. We may not have mentioned them here, but that’s not to say they don’t exist.