What determines the price of Cryptocurrencies?
What determines the price of Cryptocurrencies?

By jordanjnr | Crypto Digest | 4 Dec 2019


If you find this post educative, entertaining or relevant,kindly leave a tip below to support my work. Thanks.

We've all wondered this at some point.

We check Coinmarketcap for the price of Bitcoin, and we move into Binance and the prices are exactly the same.

We jump into Coinbase and the prices are similar.

Bittrex? The same thing.

Bitfinex? The same thing.

What gives?

How is the price of Bitcoin and other cryptocurrencies determined?

Well, we'll have to use an analogy.

What determines the price of the regular stuff we buy every day? Like chocolate,for instance.

The most important factor is how much the seller is willing to sell it for, and how much the buyer is willing to pay for it.

Say for instance that John wants to buy a bar if chocolate at $3.50. If the seller wants to sell that bar at $5.00, there won't be a deal between the both of them,because they're not offering the same prices.

But say they strike a deal at $4.25. Then a transaction happens.

And the price that the seller is willing to sell for is determined by many factors.

Production costs,the time of the year (eg festive seasons) and the number of bars they sold the last time.

All these factors work together to determine the chocolate bars sales price.

Now many people might not realise this, but Bitcoin's price is set in the exact same way the price of that chocolate bar is set.

Sure, the factors governing the sales price are far different from each other.

But when millions of buyers agree with a single seller's sales price,the price or Bitcoin is set at that price.

And the same is true for all other cryptocurrencies,even though the factors governing their sales prices differ from each other.

"Why then are there market downtrends? Shouldn't the price keep going up since humans set the price?"

This is answered by the fact that some sellers do not agree with the price set by some sellers. They set their own price lower to get the maximum amount of profit,and once everyone accepts that low price, it's game over for any bull uptrend.

The price will continue to fall till bears lose control of the market(a bear in this case is someone who sets the price low).

Till it rises again.

And falls again.

And the cycle continues.

This is how the price of Bitcoin and other cryptocurrencies is determined.

If you find this post educative, entertaining or relevant,kindly leave a tip below to support my work. Thanks.


jordanjnr
jordanjnr

Hello! I am a Blockchain enthusiast,bitcoin investor,CEO of BigTycoon group and I love crypto! Hit me up @TycoontechBlog on twitter!


Crypto Digest
Crypto Digest

Daily crypto news, updates and possible price fluctuation directions sound good to you? You're in the right place if that's the case. Please, always remember that we are not analysts....do your own research!

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.