What Determines Cryptocurrency Prices?

In recent times, there have been heated debates about how bright and prosperous the future of crypto is. Public opinion has been divided with some people defending cryptocurrency as the currency of the future. Meanwhile, others maintain the chances of cryptocurrency taking over are very slim.

However, one thing not in doubt is that cryptocurrency is one of the most important financial innovations of the past 20 years. Defined as decentralized digital currencies which facilitate peer-to-peer transactions without the need for third-party intermediaries, cryptocurrencies have greatly disrupted the world of finance.

Let’s now investigate the value of crypto and the basis that forms the latest pricing of these assets.

How Do Cryptocurrencies Work?

That’s because cryptocurrencies rely on Blockchain technology to provide a trustless system constituted of a network of computers that verify and validate transactions. These transactions are then recorded on an immutable public ledger.

That way, individual users cannot modify transaction information because all the transactions have to be validated by all the nodes in a chain. Additionally, transactions cannot be reversed because the Blockchain is immutable, and recorded information cannot be changed.

This eliminates the need for a centralized monetary authority like a Central Bank, commercial bank, or cross-border payment system to ensure all parties involved in a transaction respect their agreement and does not exploit each other.

A Tradable Asset

Besides being a medium of payment that provides an alternative to fiat currencies, cryptocurrency is also an asset class constituting tradable assets. Therefore, investors can buy cryptocurrencies and then sell them at a profit depending on market movements.

It is this quality of cryptocurrency as a tradable asset that makes crypto prices vital to all crypto investors. Crypto traders constantly monitor real-time crypto prices so they can buy their preferred cryptocurrencies when prices are low and sell when the crypto prices go up.

How is the crypto price calculated?

Since the price of crypto is crucial to crypto traders and investors, it is important to understand how to calculate it. The formula for calculating cryptocurrency price is quite straightforward. All one needs is to have the real-time market capitalization of a particular cryptocurrency and then divide it by the total number of crypto in circulation.

For instance, the current Bitcoin price as of 19th January 2023 is about $20,774. To get this real-time crypto price, you must divide the current Bitcoin market cap by the total number of Bitcoins in circulation. The same applies to calculating the real-time price of ETH and any other cryptocurrency.

What Makes Crypto Prices Go up?

With crypto price movements being central to whether crypto traders make profits or losses, it begs the question? What causes crypto prices to go up? Well, crypto prices change in response to changes in the demand and supply of cryptocurrencies.

That means whenever the demand for a cryptocurrency goes up, there follows a corresponding increase in the price of that cryptocurrency. Conversely, the price of crypto drops when demand goes down.

Since crypto is still a currency in a decentralized economy, an increase in supply usually results in a drop in prices. This is because oversupply can lead to an inflation of the currency thus making it less valuable.

On the other hand, a low supply of crypto can cause scarcity of the asset which generally leads to an increase in prices. Therefore, price movements of crypto are mainly caused by changes in supply and demand.

Other factors that influence crypto prices include the cost of minting cryptocurrencies, competition from rival cryptocurrencies, statutory regulations, and the general attitude towards the crypto market.

For instance, if the authorities in a particular jurisdiction introduce stringent regulations that make crypto trading unfavorable, investor confidence might drop. This can in turn result in a drop in crypto prices.

On the other hand, if regulatory pressures are reduced and the environment is made more conducive for crypto trading and investing, confidence goes up, and in turn that can positively influence crypto prices as demand will increase.

Who Sets Crypto Prices?

There is no particular individual, entity, or authority that sets crypto prices. Rather, cryptocurrency prices are autonomously determined by the market forces of demand and supply. The higher the demand for crypto, the higher the prices, and vice versa.

As such, success in crypto trading relies on sound knowledge and skill in analyzing crypto markets and predicting price movements based on current and possible future events. That is because markets are dynamic and sometimes even very volatile.

Where to Check The Current Price of Crypto?

Knowing the current price of crypto is important if you are a crypto investor, trader, or enthusiast who needs to make well-informed decisions or you simply want to be up-to-date on what is happening in the crypto markets.

The best place to find out the current price for crypto is on any leading crypto exchange like Gate.io. That’s because the cryptocurrency prices on such platforms are constantly updated to match real-time crypto market movements.

Therefore, if you plan to take part in crypto trading and you need to know current crypto prices that are accurate, simply visit Gate.io to access the world of crypto in all of its glory.