A moment ago, I watched as the value of my Bitcoin cash in my read.cash wallet plummets downward again, this has happened several times this week leaving me curious about the causes of this rising and falling nature of cryptocurrencies. I have seen most users here asking hysterically why is their money going down as though someone is stealing from it. All that many knew is responsible for the rise and fall is market volatility, but what is responsible for the volatility? Since am not a Crypto technician nor a trader, I felt it necessary to undertake thorough research on the possible causes of the rising and falling nature of cryptocurrencies and came out with the following findings.
Reasons for the fluctuations in the price of cryptocurrencies
1. Media influence
One of the major reasons why cryptocurrencies price rise and fall is media influence. Cryptocurrencies news platform and exchanges that published Crypto news has a great effect on the price of a coin. When a popular crypto news platform published news about a new coin and its potentials, public attention is pulled towards that coin causing a rise in the price of that coin with a downside effect on other coins in the same class. Also, media broadcast by a popular personality in support or against a particular coin or cryptocurrencies has a great influence on the cryptocurrencies market as investors weigh their options on which coin to put their money thereby leading to a fall in price as investors withdraw their investment from a particular coin. The more investors for a particular coin the higher the value of that coin. This is why BTC remains the most valued coin due to the larger numbers of investors.
2. Relationship with the Bitcoin code
Most of the popular coins like BCH are a direct offshoot from the Bitcoin code with some changes in the infrastructures and network operation. What this means is that a rise or a fall in the value of BTC directly affects the value of other coins that are related to it. Most prominently, any substantial rise in the price of Bitcoin leads to a substantial fall in the value of altcoins. This is because funds from other altcoins are pulled towards Bitcoin once there's an increase. Altcoins refers to any other cryptocurrencies aside from Bitcoin.
3. Demand and supply for a coin.
The economic concept of demand and supply have a great impression on the derivation of cryptocurrencies value. As with other Commodities, the higher the demand the lower the supply. This is also true in the crypto ecosystem. When the demand for a particular coin is higher than the supply the price value of that coin will increase due to competition among investors. On the other hand, if the number of coins in supply is higher than the demand for the coin the price of that coin is bound to plummet downward. Another way to understand this is a situation where the majority of Bitcoin cash holders decide to sell their coins at the same time when there is no corresponding demand for it, the price of Bitcoin Cash will fall at that particular moment.
4. The numbers of users on the blockchain
The numbers of users on a particular coin blockchain also determine the strength and value of the coin. The more people on a particular coin network the more stable and valuable the coin. This is why mass adoption is required for any coin such as BCH to have more value. Onboarding more people into the Bitcoin cash community is adding value to the coin and giving it more stability as more wallets are created demand for the coin increases, this leads to an increase in price value of the coin.
5. Utility and difficulty in mining the coin
Utility means useability. The utility of any cryptocurrencies also plays a role in determining it's value. The user base of a coin determines the pricing of the coin. The more useful and acceptable a coin gets the stronger in value the coin get. This is the reason why Bitcoin is leading in value. Its utility and acceptance are way higher than any other coin across the world.
Also, the more difficult it is to mine a coin the higher the value of that coin.
Other factors affecting volatility include but not limited to
1. cryptocurrencies traders
2. Competition in the crypto space
3. Technical software update
It was really helpfull for us to know about that fluctuations.