Cryptocurrencies are digital assets that are not controlled by central banks or other regulatory bodies while providing transparency and security for money transfers. This is due to the blockchain technology at the heart of cryptocurrencies.
Cryptocurrencies have nothing to do with third parties, regulators or officials, who use various anti-inflation mechanisms to keep the normal price of traditional assets at the required level.
Let’s look at how this works in the case of digital assets and what drives cryptocurrency rates up.
What Influences the Rate of Cryptocurrency?
Here are some of the aspects that can change the rate of cryptocurrency.
- Mining of digital currencies. Crypto assets such as Bitcoin and Ethereum are produced at high cost and energy consumption. This process has received the name “mining”. Essentially, it involves participants (miners) buying expensive and powerful computer equipment that can solve complex mathematical tasks to create new blocks on the blockchain system. In return, they receive coins as a reward. While bearing huge electricity and equipment costs, mining participants receive much higher earnings.
- Correlation between supply and demand directly impacts crypto exchange rates. If the demand for this or that coin is greater than the supply, the price will rise due to scarcity. Conversely, if there is a coin shortage, the demand for it increases. That is why many cryptocurrencies have a limited number of coins (Bitcoin). Conversely, some crypto assets are issued in unlimited quantities, and, to avoid deflation, developers have introduced a mechanism to burn crypto assets. This “burning” causes a shortage of coins, so prices do not fall.
- The market trend and investors’ sentiment also impact crypto exchange rates. There may be an upward and downward market trend when most investors behave similarly – buying or selling crypto massively. When large portions of digital assets are sharply sold, it creates a panic mood in the crypto society, causing a chain reaction where more and more holders get rid of their crypto savings.
Crypto exchanges rates are different from platform to platform. We recommend looking for credible and reliable crypto exchanges for conducting operations with digital assets. WhiteBIT, Binance, Kraken, and Coinbase – these platforms are designed for trading cryptocurrencies and allow convenient tools for efficient trading.