Crypto is a digital asset that is not controlled by central banks or other regulators, at the same time, they provide transparency and safety for transfers. It’s all due to blockchain technology lying at the core of cryptocurrencies. Crypto has nothing to do with any third parties, regulators, and officials, that are usually capable of keeping the rates of regular assets on the needed level by applying various anti-inflation mechanisms.
Let’s see how it all works with digital assets and what makes rates go up?
Things That Affect Cryptocurrency Rates
Here are the aspects that may change cryptocurrency prices.
- Correlation of supply and demand. Like in the regular world, supply and demand affect cryptocurrency rates. If demand for this or that coin is higher than supply, there is a shortage for it, so the price moves up. And in the reverse direction, when there is a shortage of coins, it raises demand for them. That is why many crypto assets have a limited number of coins that will be issued (Bitcoin). On the contrary, some crypto assets have unlimited emissions, and to prevent becoming deflationary, project developers implement the mechanism of burning crypto assets. This “burning” creates a lack of coins, so the rate does not drop.
- Production of digital coins. Such crypto assets like Bitcoin and Ethereum are generated costly and energy-intensively. The process got the name “mining”. It is based on a “proof-of-work” protocol. The essence is that participants (miners) buy expensive and powerful computer equipment capable of solving complex math tasks for generating new blocks in the blockchain system. In return, they receive coins as a reward. It motivates the participants (miners) to compete. Of course, bearing tremendous expenses for electricity and equipment, participants receive much bigger rewards in return. So the price of crypto cannot be low.
You can keep track of the asset rates on a cryptocurrency exchange. Such platforms are meant to conduct crypto transactions between users, enabling convenient tools for trading. We recommend checking out the WhiteBIT crypto exchange for a deeper investigation of the question of crypto prices.