Cryptocurrency has been a hot topic for a while now and more people are interested in trading than ever before. The issue with this is that many people have had acquaintances that have made some extra cash and then feel like they can simply jump right in with investing. This is a dangerous move and it is definitely worth doing your thorough research and learning the basics, such as what affects the value of cryptocurrency? In our latest blog, we will do just that, we will go through some of the factors that influence the price of cryptocurrency.
What Affects Cryptocurrency Value?
Node Count
A node is a computer that is connected to another computer that follows rules and shares information with each computer connected. This helps to synchronise blockchain. The node count shows how many wallets are connected to the same network or blockchain. This is not hard to find as you can simply Google the network and it will show you.
Alternatively, you can visit the currency web page and it will tell you there. What affects the value of cryptocurrency from the node count is that it shows how strong a community is. The higher the node count, the bigger the community which offers demand, which in turn, increases the value of cryptocurrency. What also affects the value of cryptocurrency is the fact that high node counts also indicate the strength and decentralisation of a network.
Tip: Before investing in a currency, ensure you check that it is priced reasonably. You can do this by looking at the currency node count as well as the total market capitalisation. Once you have these figures, compare them with a popular or strong currency. This is not 100% accurate, but it can give you a good idea of whether it is a good deal or not.
Production Cost
The production cost is also what affects the value of cryptocurrency. Each day, miners will use bespoke hardware and specialised servers to create new tokens and confirm new transactions. Once a transaction is verified, the miner will be rewarded with virtual tokens and a fee for their work.
The network activity from miners is how cryptocurrency persists to work and is also what affects the value of cryptocurrency. This is because if mining costs rise, the value of the currency mostly increases too. This is essential as miners will not be using all of their time and resources if the reward at the end doesn’t cover their expenses whilst also having a reward for themselves too. (It is important to know that this is not always the case so it is always best to do your own research before committing).
Crypto Exchanges
When a cryptocurrency is available on multiple platforms, it allows more people to buy the coin which is what affects the value of cryptocurrency. The issue with this is that it also increases the number of people buying and using the currency. If you need more than two exchanges to swap cryptocurrency tokens, you will have to pay a fee for each swap, which in turn, is what affects the value of cryptocurrency and increases investment costs.
Competition
Minors are always looking for new currencies all of the time and some are lucky enough to find them. With new currencies being launched every day it can be extremely competitive. The issue with this is more coins that have no real project or purpose are available and it makes no sense. You can now get meme coins, celebrity coins, sports coins and much more. The good thing about these coins is that, due to the mass production of these coins, at least one of these may get lucky and build a strong network which is what affects the value of cryptocurrency.
Government Regulations
Many countries have seen how popular crypto trading has become and are very uneasy at the fact the system is decentralised and, worryingly, unregulated. Due to this, the government looks for different ways to control the market. One of the quickest and easiest ways governments have done this is by adding tax to the money people use to cash out, which is what affects the value of cryptocurrency. Minors and traders are more clever than this though, as it only applies to some coins and not others. Traders simply swap the currency to a coin that isn’t regulated to cash out.
What affects the value of cryptocurrency negatively is when governments put a complete ban on major cryptocurrencies such as Bitcoin, Ethereum and some other coins. If a country with a large following of crypto users and then regulations change to ban or limit exchanges, it can significantly decrease the value of the coin.
Social Media
What has affected the value of cryptocurrency in the past is social media hype. It can increase the value as well as decrease the value so it really does affect the value of cryptocurrency in both ways. Influential people to the crypto exchange can significantly affect the value of cryptocurrency. An example of this would be how Elon Musk affected the value of the DOGE crypto coin, nobody knows whether he meant to or not, but it certainly affected the value.
If you have ever had any issues with cryptocurrency trading and have lost money and it wasn’t your fault, contact us today and we can help recover your losses.
