The value of the most popular cryptocurrency, bitcoin, changes from time to time. For example, last December it was worth $20,000, in February of this year its price fluctuated from $6,000 to $11,000, and now you can buy a bitcoin for $7,500.
The price of cryptocurrencies, like any asset, is shaped by supply and demand. A rise in price is always a rise in demand, a fall in price means a fall in demand. Cryptocurrencies are mostly decentralized. This means that there is no regulator above them, which, if necessary, could control the situation on the market, like central banks do, raising and lowering interest rates (thereby making national currencies more expensive or cheaper). Cryptocurrencies are different: their price is formed based on customer demand for the asset. Factors that directly affect the growth/decline in demand for cryptocurrencies can be very different, both real and artificial (manipulative). Here are a few examples:
1. hype provoked by the expectation of growth/fall of coins, various expert opinions and forecasts published in the media and social networks. Fake news. Cryptocurrencies, by their very nature, are very susceptible to the influence of information that is not always correct and truthful. One striking example was a publication about the cryptocurrency ban in South Korea in January of this year. The Korean media misinterpreted the statement of the Minister of Justice, these reports were subsequently translated by foreign news outlets, bitcoin prices plummeted, followed by altcoins. A little later, the South Korean government "rehabilitated" by stating that there was no question of a ban, nevertheless the cryptocurrency market was seriously affected.
2. Manipulation of traders (verbal interventions). When various crypto gurus like Vitaly Buterin (founder of Ethereum) or Charlie Lee (founder of Litecoin) made statements and forecasts, it gave significant support to coins. However, gradually, as in the case with fake news, the crypto-community became more critical of various statements in the spirit of "bitcoin will grow to $50,000 by the fall/summer/winter/end of the year". Accordingly, the influence of this factor decreased considerably.
3. Regulators and their policies on cryptocurrencies. Any positive or even neutral statements, such as the words at the G20 summit that cryptocurrencies do not threaten the global financial system, support the market and lead to value growth. Previously "hesitant" investors begin to buy once they are convinced that there is no threat of a ban. Due to this, demand grows, and with it the price.
4. Listing on exchanges. When a cryptocurrency is added to the list of trading instruments at a large cryptocurrency exchange (for example, like Steller at Huobi exchange or like Litecoin - at Coinbase), the users of this exchange get access to buying this coin, which leads to an increase in demand. After that, the price of the cryptocurrency rises.
5. Hacking attacks. Hacking of exchanges, loss of money by investors - all this leads to a fall in the value of cryptocurrencies, as it demonstrates the weakness of this industry: unreliability, insufficient security. As a result, investors begin to sell their assets and seek to "go into fiat" (sell cryptocurrencies and get regular money). Accordingly, demand falls, supply rises, and the price falls.
6. Contracts with partners from the "traditional business" - big banks, PayPal, Visa - lead to the growth of the cryptocurrency rate, as investors' faith in the fact that the coin will exist and the project will develop grow grows.
7. Some cryptocurrencies are tied in price to another asset: for example, to the U.S. dollar (Tether), or oil (El Petro)."