Key Fundamentals for Cryptocurrencies
Since investing in cryptocurrencies becomes more and more popular, people are eager to learn more about these innovative digital assets. Because of that, we will start a series of articles in which we will discuss the basics of cryptocurrency investing and what should any regular person know before deciding to put its money at risk.
We will begin by talking about some of the fundamentals behind the price of cryptocurrencies and explain briefly what influences their price.
The economic calendar for crypto?
In this case, no. You no longer need to constantly watch that economic calendar you used to monitor when trading the forex market. However, when it comes to cryptocurrencies there are a few metrics that you need to consider. Behind most of the tokens lies a company and how they perform over time can have an influence on price.
Products and services that enable mass adoption
One of the main critics addressed to cryptocurrencies is that they lack utility. The blockchain technology is truly an innovative, but still, at the present time, using cryptocurrencies at a large scale is not possible. The reasons are many: security issues, underdeveloped infrastructure, people’s education, and so forth. Because of that, each time a company comes with ideas or tools that enable mass adoption, you will that the prices are going up.
Emotions in the spotlight
There is a particularity when it comes to cryptocurrencies that do not manifest itself so intensely in any other markets. It is represented by emotional reactions from the market participants when prices are moving strongly in a certain direction. The past performance of price has a leveraging effect, determining people to buy or to sell, depending on what happens in the market.
Any person wanting to invest in cryptocurrencies should be fully aware of this detail since it can really increase the level of profitability.
Most of the cryptocurrencies are created through the process of mining. It also involves the use of energy, so miners are selling the newly created tokens by taking into account the expenses with energy use. This is another aspect to be monitored since each system has a certain level of difficulty that is growing day by day, which leads to more energy needed.
These are some of the most important fundamentals that have the potential to influence the price of cryptocurrencies. Make sure to study all of them in depth to see how they can impact the market in the future.