Сrypto economy remains very interesting and somewhat mysterious to us. When thinking of this new trend, our consciousness often falls into dissonance, but still, we try to understand it desperately. Thus, we return to basic questions like how, why, and what will happen next. The genesis of Blockchain technology has presented a challenge for all of us.
It is no wonder why we lack experience with cryptocurrencies. Here are four major reasons:
- Major external influence results in cryptocurrency falls and rises giving high volatility of the crypto assets;
- There is no true understanding of how to deal with new technology because it is all new — everything happens for the first time;
- Vast majority of people doesn’t understand the basics of blockchain technology behind the coins;
- Cryptocurrency trading seems almost like gambling because of little trading experience.
Let’s narrow the field of view and try to answer most basic, essential questions.
Reasons for cryptocurrency price growth
There are two major reasons for cryptocurrency growth.
- On the one hand, it happens due to the constantly increasing number of cryptocurrency users.
- On the other hand, currency speculation directly influences current market prices, which can lead to a bubble burst.
ICO is a new way to introduce tokens, the price of which will be established by the request of the coin initiating team. It is initially set up during the ICO and can be changed later after the listing at the exchanges where price will be regulated by the market.
Token represents project value that can be different: income, possession of the property, receipt of goods or services or a symbol of the project’s gratitude for the funding received, without any obligations coming from the project. In case if the token is being meaningful, there is a chance for people to start using it and the token price will go up.
Tokens draw more and more attention with the increasing number of crypto holders including speculators who do not care about the functionality, but the profitability. In this context, speculators are cryptocurrency investors and traders who tend to jump off the train at the first signal of danger, selling depreciating tokens.
Users and speculators are the two main factors that affect the price of the cryptocurrency. In most cases, they influence the volatility of the course and the level of crucial support. Even the strongest cryptocurrencies have insane volatility, which clearly demonstrates that none of them have an overwhelming number of loyal users. It happens because pure speculation is always able to jeopardize the confidence of conservative investors.
User’s expansion results in the growth of capitalization of the cryptocurrency. Thus, its volatility decreases as well as speculators interest, which often indicates that particular crypto assets become mature. From an investor’s point of view, it is the end of a highly profitable investment instrument. However, rapidly growing number of projects shows that there will be more and more cryptocurrencies to gain profits from.
