How Are Cryptocurrency Prices Determined?

By Fotis Dixon


Reviewed by: Fotis Dixon

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How are cryptocurrency prices determined

You may have often heard that the price of a crypto has crashed or it has surged. Also, you may come across many price predictions made about major cryptocurrencies as well as newer ones.

What affects these price changes of the crypto? Or, how are the crypto prices determined in the first place? Have you ever thought about all these?

Are you curious to know all these? If you are investing in crypto, then shouldn’t you be interested to know all these? At least some of you may have wanted to know about these. However, getting to know all these is like stepping into deep waters.

If you do not have the proper guidance when you step into the deep waters of crypto, then there are high chance that you get lost. Here we are ready to help you know everything about determining crypto prices. 

The Determinants Of Cryptocurrency Prices

The Determinants Of Cryptocurrency Prices
  • Supply and Demand

The supply and demand that the crypto has in the market hugely influence the price of the crypto. The total supply of the crypto is the total amount of crypto tokens or crypt coins of a particular crypt that is in circulation or that has been mined so far.

It also includes the amount of crypto that is reserved or locked. The circulating supply of a crypt is the total amount of crypto that is in circulation, that is owned by investors or the ones that are open to be traded; the ones that are not reserved anywhere.

Supply and demand of a cryptocurrency is the total number of buyers and sellers that a particular crypto has in the market. If there are more buyers than sellers for a crypto then the price of the crypto goes up. At the same time, if the crypt has more sellers than buyers, then the price of the crypto goes down. 

  • Utility

Utility is the way that the crypto or the platform can be used. These days, most of the crypto projects aim at solving multiple real-world problems. Some crypto may only serve as a trading token, while others  you can use as a utility token, staking in a may also provide you with governance opportunities 

  • Availability

Availability determines the ease involved in buying the crypto. If crypto is widely available, then more investors will be interested in it. Moreover, if it is not widely available, there may not be as many interested investors for that particular crypto.

Also, the crypto with the wide availability will be available on more crypto exchanges on the two ones as well. You can not expect all the investors to buy the crypto from unregulated exchanges.

  • Competition

Competition refers to the competition a crypto faces from other cryptocurrencies in the market. All the established crypto in the market are in competition with each other.

However, the type of cryptocurrency also plays a large role in the competition. Some cryptos are smart contract blockchains at the same time some others are digital stores of value. 

  • Fear and Greed

Fear and Greed that crypto has is used to gauge the sentiments that the investors have towards a particular crypto. The emotions of the investors influence the market value of the crypto. When a certain crypto has more ‘fear’ sentiment in the market, it means that the crypto holders are fearful of losing the money that they have invested in the crypto.

Therefore, they will try to sell their crypto assets. The decline in crypto value can lead to fear and this fear can lead to a further decline of the value of the crypto. ‘Greed’ is when the price of a crypto is shooting up. It will lead to potential investors trying to buy and accumulate more crypto. 

  • Popularity

The popularity of crypto can shoot up or push down the price. For example, if a major crypto whale makes a lot of investments in crypto, more people may turn towards which can increase its value. There have been instances, where a single tweet about a meme coin or crypto resulted in it reaching historically high prices. 

The Bottom Line

We covered the major factors that may determine the price of a cryptocurrency. There are a lot more factors that can influence the price of the crypto such as regulations, new market events, whale actions, liquidity, technical analysis, governance, tokenomics, and more. 

Fotis Dixon

Fotis Dixon is a business expert from the UK. He's written lots of articles about the newest market research and trends, especially on cryptocurrencies. Fotis is good at breaking down different topics to give useful information, helping readers stay updated on emerging trends.

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