The introduction of cryptocurrency has opened up investment opportunities for people across the globe. These opportunities are secure and there is no need for third party assistance. That said, not all cryptos are equal. Like stocks and other investment vehicles, each crypto has its positives and negatives. Cryptos are a volatile asset class and come with inherent risks. Several factors influence price and the most important is demand and supply. Here is a look at some unique factors that play a determining role.
Internal factors include hash rates. This is a figure which gives laypeople idea of the mining capacity on a blockchain network. Low hash rates, high transaction costs and other factors play a key role along with rule changes in influencing crypto prices. Rule changes are set by DAOs also play a role in pricing.
Political factors also play a role in crypto pricing. In many countries, crypto mining and trading are banned. The reason for this is that the concept and functioning of crypto is not well understood. One example of this is China’s crackdown. Due to unprecedented measures taken by China, the entire global economy suffered huge losses. Governments of different countries are trying to get experts to explain the way crypto works and whether it is a good investment vehicle. The good news is that Bitcoin has been legalized in countries like El Salvador. In fact, El Salvador has adopted Bitcoin as legal tender.
Cryptocurrencies are slowly gaining ground and adoption in many countries. Central banks have started to issue digital currency too. Crypto is here to stay and will probably be adopted in the decades to come. Current market fluctuations have caused people to dump their holdings and it will take a while for investor trust to gain traction again.
