What does the exchange rate of a cryptocurrency depend on?
Cryptocurrencies just a few years ago could not boast as much popularity as they do today. Today, however, this type of means of payment enjoys exceptional recognition, both among people in the industry and third parties who would like to raise additional funds with the help of specific transactions. To carry out such activities, it is necessary to constantly monitor the current rates of cryptocurrencies. Wondering what the cryptocurrency exchange rate depends on and where to track it to always have access to up-to-date information? Below, we dispel all your doubts.
What influences the cryptocurrency exchange rate?
With the growing popularity of cryptocurrencies, you can also see increasingly bold attempts to conduct transactions involving them. Despite the fact that such a possibility is available to everyone interested, one should not forget about proper preparation, thanks to which it is possible to carry out the whole process with the best possible final result. This would not be possible if it were not for keeping track of the current exchange rate of each cryptocurrency. What does the exchange rate depend on? Within the answer to this question, there are several distinct factors.
The law of supply and demand
By far the most popular factor that can be recalled not only when discussing the situation of cryptocurrencies, but also any other transaction. It is the law of supply and demand that somehow steers the market - it is no different in the case of cryptocurrencies. The more popular a currency becomes, the more you have to pay for it. This principle also works the other way round - if any type of cryptocurrency starts to lose popularity significantly, this quickly becomes apparent in its price. At this point, it's worth pointing out one important difference between cryptocurrencies and traditional currencies. Unlike their physical versions, cryptocurrencies have a limited supply. You can also observe its gradual slowing down. So, if you are wondering what affects the exchange rate of cryptocurrencies, you should not overlook the important issue related to the law of supply and demand. This universal principle also applies to cryptocurrencies.
Rules and regulations
Although cryptocurrencies are considered the means of payment with the greatest decentralization, this does not exclude the application of certain regulations to them. So, if you start wondering what the price of a cryptocurrency depends on, it is worth considering the legal aspect as well. The interest of national authorities in the issue of cryptocurrencies can have a twofold effect, depending on the actions taken. In history, we can already distinguish many situations in which this kind of interference did not bring anything good for the cryptocurrency market. An example is China, where in 2021 the authorities tightened regulations with regard to Bitcoin. The reaction was a rapid decline in the price of cryptocurrencies, which reverberated negatively throughout the market. What does the price of a cryptocurrency depend on? There is no denying that it is also affected by regulations, but it is not always negative. Countries such as El Salvador have expressed a positive attitude to this type of currency, resulting in increasing talks on the adaptation of Bitcoin as an official means of payment. Such action has a direct positive impact on the cryptocurrency exchange rate.
The cost of mining
What affects the exchange rate of cryptocurrencies is not always clear to people who are just entering the world of such means. Thus, the costs of mining, which are impossible to talk about in the case of traditional payments, are not obvious. However, cryptocurrencies need to be dug up before making a transaction. This is done through the use of special devices called cryptocurrency miners.
Cryptocurrencies - what does the exchange rate depend on?
There are many more minor factors affecting the price of cryptocurrencies - the role of the media as well as financial crises cannot be ignored. Before making any transaction, it's worth checking the current exchange rate - you can conveniently do it using the Impily wallet.
Attention! The above article neither in whole nor in part constitutes a "recommendation" within the meaning of the provisions of the Act of July 29, 2005 on trading in financial instruments or the Regulation of the European Parliament and of the Council (EU) No. 596/2014 of April 16, 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6 / EC of the European Parliament and of the Council and Commission Directives 2003/124 / EC, 2003/125 / EC and 2004/72 / EC and Commission Delegated Regulations (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65 / EU of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms and defined terms for the purposes of this directive. The content contained on the website does not meet the requirements for recommendations within the meaning of the above-mentioned act, incl. do not contain a specific valuation of any financial instrument, do not rely on any valuation method, and do not identify investment risk.