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Factors that Influence the Price of Virtual Currencies

Decentralized virtual currencies are not controlled by any government, organisation, or company. All our experience with price determination of traditional fiat money is not applicable in this case. Furthermore, price fluctuations are a subject for trading virtual currencies and earning on the price difference. To predict the next rise or drop in the virtual currency price, it’s good to know what makes it do so. We tried to figure out some of the factors that influence the price of a virtual currency.

People’s Minds

Virtual Currencies, specifically cryptocurrencies, are probably the most democratic currency in the world, as its price is formed based on the correlation between supply and demand on the market of each virtual currency exchange. Thereby, if a person with significant amount of virtual currency decided to sell them at once for some reason, it may lead to a price drop on a certain virtual currency marketplace, and to a drop of the virtual currency price in average. The next factor is something that really influences people’s minds.

Virtual Currency News

Trying to predict where the virtual currency price will go further — up or down — we constantly track news on that particular virtual currency. As one of the famous companies adopts virtual currency, the price goes up. Such a situation happened when Dell or Virgin Galactic started accepting Bitcoin. At the same time, when Apple deleted all the Bitcoin apps from the App Store, Bitcoin price experienced a notable drop. For those who are only considering to enter the Bitcoin ecosystem, news presented by traditional mass media come in hand. TechCrunch hosts a weekly Bitcoin-focused podcast, such media monsters as Forbes, BloombergView, WIRED, and the Wall Street Journal cover Bitcoin news as well.

Killer App

The more people use virtual currency in everyday life, the broader adoption it gains, bringing the price to the moon. But even though virtual currencies have indisputable advantages, it is not as easy in use for everyone. Therefore, it makes sense that so many companies try to develop a real virtual currency killer app that would ease usage in  everyday life to such extent that it stands near Visa and MasterCard.This is how virtual currency is more an more entering not only the lives of geeks and Wall Street traders, but also developers and IT companies.

Exchange Hacks

A dark side of the factors that influence the price are exchange hacks or hacking incidents cited. Perhaps, the most significant price drop throughout the history of Bitcoin was the Mt.Gox incident. Not only people lost their Bitcoins, but they have also gained a disbelief in the system they trusted so much. Those who were not affected by the exchange hack directly, still felt the turbulence of the whole industry because of the price drop.

Regulation

Each time any government releases official statements regarding regulation of digital currencies, the price is affected. Even if government actions are not directly related to virtual currencies, the impact is also present. Let’s recall, for example, the banking crisis in Cyprus, when the government seized funds, which led to many discussions whether Cyprus should turn to Bitcoin adoption.
Henry Banayat

Henry Banayat

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