As traditional stock market conditions are not stable, investors are shifting towards trading cryptocurrency. Compared to stocks and bonds, trading cryptocurrencies yields higher returns in most situations.
While governments or banks do not regulate cryptocurrencies and altcoins, they are highly volatile. Volatility is the main thing in cryptocurrency markets, and only through this, investors earn profits or undergo huge losses.
Trading and investing in altcoins is mainly done based on altcoin news, as no one can precisely predict markets. Though this is not a good way, sometimes, it can save you from making losses. Not all news is trustworthy, and many times people like to spread rumors to bring cryptocurrency prices down.
Investing in altcoins is never easy in volatile markets. Hence here are some factors you should know that affect prices.
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Utility
The main factor that determines the price of any altcoin is its usability and utility. If the altcoin is set to solve and tackle any real-life problem, it will survive volatile markets. If the altcoin is just a meme-coin with no real-world implementations and use-cases, it will tumble down.
Most investors check the fundamentals before buying cryptocurrency, and if the use-cases are solid, nothing can obstruct the altcoin’s growth.
Scarcity
Scarcity is another crucial factor determining the prices of every cryptocurrency. If the altcoin has solid fundamentals and its supply is also significantly less, it will soar high in the market.
Investors and traders tend to buy things that are scarce and hold high values. Hence if the total supply of any altcoin is very less, there are chances that people will keep buying, taking prices up even in volatile markets.
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Popularity in the Community
Every cryptocurrency starts as an altcoin. It is the popularity among the masses that takes it to the mainstream. Any altcoin with good fundamentals and reasonable scarcity will become popular in the cryptocurrency.
Most altcoin developers try to market their coins and reap tremendous benefits from them. Community marketing is the ideal way to increase an altcoin’s demand in volatile markets. As the altcoin news gets popular, it will surely increase its prices and survive volatile markets.
Regulations
Governments are trying to regulate this digital asset class. Through taxation laws and even identity verification laws, banks and governments are trying to uncover the hidden activities being carried under cryptocurrency.
Sometimes, to tackle situations, governments impose strict measures that stop the activities completely. In such times, altcoins often drop drastically, making people panic and sell off at a loss. Hence, regulations and restrictions imposed by influential organizations prove to be a significant factor affecting prices.
Bitcoin Halving
It is seen that all altcoins follow the footsteps of bitcoin’s performance. If bitcoin rises, the others rise too. While it falls, altcoins suffer a big blow. In the last two halving cycles, it has become a trend that the price of bitcoin increases after halving takes place.
Bitcoin halving is a procedure that takes place every four years. As the name suggests, halving means cutting down in half. Every four years, the rewards on the block verification are cut down by half, introducing scarcity in the supply of bitcoins. As the supply decreases and demand increases, price tends to move upwards.
As said above, altcoins follow bitcoin price actions. Hence bitcoin halving is a major factor affecting the prices of all cryptocurrencies.
Most people do not fully understand the factors affecting prices and jump into investing because it seems lucrative. While trading and investing in cryptocurrencies and altcoins can be highly profitable, you should take proper care. During volatile markets, prices tend to swing up and down. Hence, it is vital to understand factors that can affect any altcoin’s price during volatile markets.
