What Are The Factors Affecting Cryptocurrency?

Cryptos can go up, but they can also go down. Like, right down. If you’re wondering why, here are a few factors influencing those prices. What influences cryptocurrency value? The first thing that comes to mind is demand. The higher the demand, the higher the price, and vice versa. For cryptocurrency, several factors influence how the price fluctuates, and in this article, we’ll take a closer look at them.

  1. Node Count

The node count shows how many active wallets exist in the same network. You can easily find this information by simply making a Google search or checking the currency homepage. But how is node count important? First, it shows you how strong the community is. A high node count is proof of a strong community, and a strong community increases the chances for that currency to overcome a potential crisis. Second, a large number of nodes can also indicate the strength and decentralization of a network, both important factors when it comes to crypto.

  1. Production Cost

The production cost is another factor that influences cryptocurrency value. Every day, miners use specialized hardware or servers to produce new tokens and verify new network transactions. Miners are rewarded with virtual tokens and a network fee for their efforts.

The miner’s network activity allows decentralized cryptocurrency to keep working. So, if mining costs increase, the cryptocurrency value may also increase. It makes no sense for miners to spend their resources mining new cryptocurrency tokens if the rewards are not big enough to cover the expenses and bring them profit. However, this isn’t always the case and isn’t uniform across all cryptos, so make sure to research before committing.

  1. Crypto Exchange

If a token is available on a large number of crypto exchanges, it increases the number of people buying and using that token. If you need two or more exchanges to swap any cryptocurrency token, you will pay a fee for each swap, raising the investment cost.

  1. Competition

The number of existing cryptocurrencies just keeps going up, with new tokens being launched every day. There are meme coins, soccer team coins, celebrity coins, and many, many more. There are also viable cryptocurrency projects among these new coins that could overcome current limitations and build a strong user network.

  1. Government Regulation

Certain governments do not appreciate cryptocurrency’s decentralized and unregulated character, so look for ways to control the crypto market.

The easiest way to control crypto is to set a tax for any fiat money people use to cash out their coins. However, this tax would apply to specific tokens, so people looking to cash out their profits can simply use a different coin to cash out.

Several countries decided there is no better way to control the crypto market than banning Bitcoin, Ethereum, and a few other coins. Unfortunately, if a country with a large number of crypto users sets new regulations against cryptocurrency, it will negatively impact its value.

Nevertheless, a few countries, such as Japan, are engaging with blockchain technology, reportedly developing a national cryptocurrency that will lead to more people using virtual tokens.