So, 2024 is shaping to be a bullish year, you know? Like, there’s this crazy demand from investors that’s way higher than the supply, and it’s sending market confidence through the roof. And guess what? Many folks are looking towards the cryptocurrency market for their share of the lip-smacking pie.
Jumping into cryptocurrency might seem tempting and rewarding on the surface, but diving in without due diligence could backfire later. Before you take the deep dive, research to find coins that’ll pay off big time and grant you decent to seismic ROIs (Return on Investment). So, before you take the step, understanding cryptocurrency prices and how they’re determined is non-negotiable.
In this article, we’ll run you through why price matters, metrics that affect cryptocurrency pricing, platforms to track crypto values and lots more.
Why Price Matters in Cryptocurrency
Today, over 19,000 cryptocurrency tokens are in circulation. A large chunk of these are altcoins with no prospects. This is why it’s important to know what coin is worth the investment and will be valuable in the long run. And one important metric to determine a coin’s potency is through its pricing.
The cryptocurrency market is prone to massive ups and downs. For context, while the Bitcoin price in December 2017 was valued at $14,156, it fell to a mere $6,448 in March 2020. That said, the current Bitcoin price is currently over $65,280. This figure signifies an over 1000% increase since the cryptocurrency’s notable dip four years ago — amazing!
From the Bitcoin example, you can see this cryptocurrency is worth investing in due to its gradual price increment over time. But despite Bitcoin’s profitable stance in recent times, it’s prone to volatility alongside other coins. Therefore, we recommend using the “history view” paired with crypto charts to get an overview of potential long and short-term price changes. That way, you can make informed investments.
Factors That Affect the Price for Crypto
The following are significant factors that can positively or negatively impact crypto prices:
- Media Coverage
You must have encountered several news outlets that mostly focus on covering everything about cryptocurrency. Guess what? The developers involved in these projects understand how the media can promote the popularity tied to a crypto-related initiative and coin. So, some folks team up with these agencies to help them push the coin.
Also, they’ll plant a few insiders in online forums to stir up buzz about a cryptocurrency. Next thing you know, it’s blowing up on social media, and the price shoots up. It’s all about creating hype to drive up demand and the price.
- Supply and Demand
Cryptocurrencies have a preset or limited coin supply. However, the process is more complex than this assertion. Basically, when coins are mined, mining rates tend to drop to ensure an equilibrium in supply. And if you’ve got some background knowledge in economics, you’d know supply and demand are key metrics in determining cryptocurrency prices.
For example, if a big ETH holder sells off his entire holdings, the market will see an unprecedented influx of Ethereum, prompting high supply. And if demand isn’t equal to supply, ETH price will drop. Conversely, if all ETH holders hold on to their tokens and refuse to sell, supply will be low. Therefore, if the coin has high demand, ETH price will skyrocket as available supply can’t settle prevailing demand.
- Market Cap
Cryptocurrency market cap refers to the total number of mined coins. To get a coin’s market cap, you’d need to multiply the current price of a cryptocurrency by the number of mined coins. A crypto’s market value dictates its stability. The greater it is, the safer the token is considered to be for investment; conversely, cryptos with lesser values are more prone to volatility. Investors seeking to understand the pricing scheme of a crypto can use its market cap to know its value.
Tracking Cryptocurrency Prices: Three Alternatives You Can Trust
To stay updated with relevant and up-to-date info about cryptocurrencies, alongside resources that can help improve your trading skills, several tools can help. These apps are available on Android and iOS devices; you can access their websites on your PC. Notable mentions include:
Coin Stats
Coin Stats is an application compatible with Android and iOS devices that’ll be handy for your crypto trading adventures. This app’s unique feature is that it permits syncing with other cryptocurrency wallets (Metamask included).
Bitcoin Ticker Widget
Bitcoin Ticker Widget is an app that works on Android and iOS devices. Using this application, you can access the latest information in the crypto space, get historic trade volume data, control your investments with the Portfolio Manager, and create customizable widgets to access critical information without launching the application.
CoinMarketCap
CoinMarketCap is a crypto price-tracking website/app that monitors over 11,000 cryptocurrencies, including notable alternatives like Bitcoin, SafeMoon, and Ethereum. This platform lets users create personalized watchlists that give them news updates regarding their favorite cryptocurrencies. Additionally, CoinMarketCap allows you to customize price trackers; when the selected crypto hits that ceiling, the application will automatically notify you.
Volatility in the Crypto Market
Volatility in the crypto space refers to the high up-and-down movements in cryptocurrency price over a particular timeline. Basically, the higher an asset’s volatility, the higher its risk and potential to either grant higher profits or losses over a short period than less volatile assets.
As a relatively new asset class, cryptocurrencies are highly volatile, as they depict significant upward and downward trends over a short timeline. Factors that facilitate volatility in the cryptocurrency scene include global events, technological advancements, and market liquidity.
Invest Wisely: 3 Tips You Should Take in Your Stride
Due to the volatility in the cryptocurrency market, employ these four investment tips to ensure you aren’t at the end of the short stick:
- Invest What You Can Afford
With all the ups and downs in the crypto world, only invest funds you can afford to lose in case the market turns negative. Furthermore, cryptocurrencies shouldn’t make more than 5% of your investment portfolio; that way, you can still recoup profits from other financial instruments if your crypto dealings fall through.
- Remain Disciplined
When investing in cryptocurrency, don’t be easily swayed by significant price changes and trends. Instead, develop a systematic approach that fends off emotionally driven decisions. Although your framework might not be picture-perfect initially, constantly refining your portfolio and strategy will see you facilitate investments that yield positive dividends in the long run.
- Don’t Underestimate Research
Cryptocurrency investment might look like a goldmine on the surface. But the reality is different. Before you commence crypto investments, research to understand the major cryptocurrency alternatives and how they work.
Doing your research prevents you from being swayed when FUD (Fear, Uncertainty, and Doubt) fills the air; as such, you’ll be able to HODL onto your assets, irrespective of negative market sentiments. Towing this route can see you on the receiving end of a massive payout.