How is the price of cryptocurrencies? A detailed analysis

I’m sure many followers of Bitcoin well remember how at the end of the year we were promised bullrun worse than last year. The point is that it’s already November 2018, and some serious movement in the market is still not observed. The volatility of Bitcoin decreases, the velocity of circulation too. May everyone hold your breath waiting for high-profile launchesscheduled for mid-December. In the meantime, let’s see how are the prices of cryptocurrencies and what can influence these processes.

As the prices of comparable cryptocurrencies with Fiat?

Neither one nor the other not provided with the product (for example, something like gold or something that has a base cost).

The main difference between the value of cryptocurrency and Fiat money is that Fiat currencies are supported by Central governments and are considered legal tender. In fact their value is based only on the government’s assertion that they have value, and the two sides of the transaction trust value.

Today, most countries use a system of Fiat currencies where Central banks and monetary reserves to control the money supply and thus indirectly control inflation. Cryptocurrency is not controlled by a centralized government or authority in most of the regions are not accepted as legal tender. Offer cryptocurrency, usually fixed, which virtually eliminates their devaluation.

The rest of the price of Fiat currencies and cryptocurrencies supported similar characteristics. And those and others can be used as a medium of exchange for buying goods and services as well as conditional means of savings.

Why are the prices of cryptocurrencies fluctuate so much?

This market is in its infancy.

The cryptocurrency market is still considered very young. Most people, except that I heard the term “cryptocurrency“, but practically are not familiar with this industry.

Young markets have many qualities that inevitably make them volatile.

Liquidity in this market is limited, if compared with the traditional markets, including the currency market. For perspective: the total value of all money in the world, over 90 trillion dollars, while the total capitalization of cryptocurrencies is about 250 billion. The difference in 36 thousand percent.

Daily trading volume of cryptocurrencies in the order of 14 billion, whereas the daily volume on the Forex market closer to $ 5 trillion. Spread – the difference between price of buying and selling on the Forex market is penny, and cryptocurrency transactions can reach several dollars. All of this points to a very narrow market, which naturally moves very quickly, which increases the price volatility of cryptocurrencies.

Every day to the market also joins a large number of new users. In the beginning of 2018 cryptocurrency exchanges reported that they every day there is a 100 thousand new users. Many of these participants are interested in the prices of cryptocurrencies or rose, or fell. This contributes to the subversive nature of the market and fuels the volatility.

Finally, in the emerging markets of distributed manipulation. A large part of the flood control major cryptocurrency exchange. They are motivated to increase their income through artificial manipulation of the prices of cryptocurrencies. One of the possible ways – the manipulation of prices displayed on the exchange. Any jumps on the chart stimulate traders to buy or sell.

This effect is compounded when you consider the thousands of new market participants, which you can easily manage. In addition, the unregulated market price manipulation to prove and virtually impossible to monitor.

From what most depends on the price of cryptocurrencies?

Prices of cryptocurrencies depend mostly on supply and demand.

This is a basic economic principle. If cryptocurrencies offer high token in low demand from traders and users, then its value will fall. Conversely, if the offer cryptocurrency is limited and demand is high, its cost will rise.

This is due to factor deficiency. It drives prices up and is one of the factors by which the price of Bitcoin has reached its highs at the end of 2017. The maximum sentence is 21 million Bitcoins BTC is relatively small in comparison with the other tokens – while demand in recent years have soared.

The price of cryptocurrency has also significantly influence the media and public sentiment. If the token or platform get negative advertising, the price usually decreases. But if the coin will get a lot of support and good media coverage, the price will almost certainly rise. That is, prices are highly dependent on human emotion and hype.

The price is also significantly affected by the level of usefulness of a token and corresponding blockchain platform suitable for real-life problems. You also need to consider the complexity of hashing the tokens with proof of performance. Roughly speaking, the higher the complexity of mining, the harder it is to increase the supply of coins that the high demand fuels the price of the coin.

How to change the price of the cryptocurrency in the last 18 months?

Bitcoin price is a good indicator of the behaviour of the crypto market as a whole.

  • In early 2017 Bitcoin was worth a little less than $ 1,000, then fell when China announced an investigation against Chinese kryptomere. At that time, the BTC trade was concentrated in China and the price of coin fell to about 775 dollars. Then, the total market capitalization of crypto-currencies was approximately $ 15 billion.
  • By March 2017, Bitcoin recovered and even overcame $ 1000, but the Commission on securities and stock exchanges of the USA has refused to endorse Bichenovii index Fund. The total market capitalization in two days fell by 5 billion, and the price again fell below 1000.
  • In April 2017, Japan legalized bitcoin and the price again rose above $ 1,000. The total capitalization of crypto-currencies was approximately 26 billion.
  • From April to July 2017 bitcoin rose steadily to nearly 3 thousand dollars, and market capitalization surpassed $ 100 billion. However, in mid-July the price for a few days dropped below 2000 for the fork Bitcoin Cash. The effect did not last long, and by the end of August, the coin went up almost 5 thousand, and the total market capitalization of cryptocurrencies closer to an incredible 170 billion.
  • But then September 4, China banned ICO. However, this step caused much less correction than expected. Bitcoin by mid-September fell to 3.3 thousand dollars, but quickly recovered and at the end of September exceeded 4 thousands. The market capitalization of cryptocurrencies then was a little less than 150 billion.
  • Since then, the price of Bitcoin really began to gain momentum. At the end of October 2017, it has exceeded 6 thousand, and at the end of November was slightly below 10 thousand dollars.
  • In mid-December, the price reached the maximum of 20 thousand dollars, but at the end of the year fell to 15 thousand, while the market capitalization amounted to 235 billion.

Source: Сointelegraph

  • By the end of January 2018 the price of Bitcoin fell to about 10 thousand, and in February accounted for 6 thousand.
  • In February, Bitcoin again rose above 11 thousand, and total market capitalization has recovered to about $ 500 billion.
  • Then on the background of discussions about activitati regulation in different markets and other shocks – such as the ban of Google ads cryptocurrency – Bitcoin price has been in a steady downtrend. Since the beginning of July 2018 gogda BTC worth a little more than 6 thousand, and the total capitalization is about $ 250 billion.

How accurate are forecasts of the prices of cryptocurrencies?

As in the case of traditional markets, forecasts of future prices of the cryptocurrency market, there are no guarantees.

Among forecasts for 2018 and subsequent years to meet the extremes at both ends of the spectrum.

Some, including John McAfee, Jim Cramer (CNBC) and Bobby Lee (CEO of the exchange BTCC), predicted that Bitcoin will be worth $ 1 million. Others take a more modest, but still high price forecasts, including the former stock strategist at JP Morgan Tom Lee. He predicts a price of 25 thousand at the end of 2018 and 125 thousand by 2022.

At the other end of the spectrum are predictions of complete or partial market crash. Small investment Bank GP Bullhound predicts the collapse of the market on 90 percent within a year, while Harvard Professor and former IMF chief economist Kenneth Rogoff predicted that Bitcoin will fall to one hundred dollars. CEO of GoldMoney Inc. Roy Sebag was generous and appreciated by future coins at zero dollars.

It is obvious that forecasts of the prices of cryptocurrencies should be treated with skepticism. But there are factors that almost certainly will affect the future price of Bitcoin and the cryptocurrency market as a whole:

  • the level and nature of regulation for dominant cryptocurrency markets.
  • the level of acceptance of cryptocurrencies in the coming year and thereafter.
  • the rate of growth of the futures market of cryptocurrencies;
  • the usefulness of the tokens and the ability of the underlying technology to solve real problems.

More data look at cryptodata.

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