Emily Clarke

Why Does the Price of Crypto Fluctuate So Often?

Cryptocurrency boomed in popularity over the last several years, giving investors of all experience levels a new way to diversify their portfolios and grow their wealth. But keep track of the Polkadot price or the average value of any other coin, and you'll notice that crypto prices fluctuate often. Track Polkadot price now! Click for updates. https://pyth.network/price-feeds/crypto-dot-usd

Financial experts call crypto highly volatile due to its rapid price fluctuations. But why does this occur?

The Effects of Supply and Demand

One of the reasons why crypto prices change so often is supply and demand, and that's true of any commodity. When there's high demand for crypto, prices will go up. The same factor influences most of the assets you can invest in.

There are limits to how many crypto are in circulation. Prices reflect how many coins are in circulation (supply) and how much people are willing to pay for them. There's a finite amount of coins available for every crypto. For example, the design of Bitcoin limits it to 21 million coins. For Polkadot, it's only 1.1 billion. As of 2023, there were already 1 billion Polkadot coins in circulation, and the fast-approaching limit does affect the Polkadot price.

Influencers and Investors

One thing that's unique about crypto is its heavy presence in media. Cryptocurrency and decentralized finance are still relatively new concepts. They're exciting to old-school and novice investors alike. Thanks to the prevalence of social media and the many people acting as "experts" in crypto, hype plays a big role in valuation.

In the past several years, well-known investors, social media influencers and even wealthy business people have spoken highly about coins and dramatically influenced prices. For example, meme coins have risen and fallen in value largely thanks to hype.

Changing Government Regulations

Because crypto is still new, government regulations are ever-evolving. In the United States, the IRS considers crypto a capital asset. Therefore, there are tax implications in investing.

In other countries, things are different. In China, for example, the government cracked down on crypto investing and mining. Therefore, concerns about its future cause investor concern, resulting in fluctuating prices.

Author Resource:-

Emily Clarke writes about global equities markets, commodities prices, forex rates and more. You can find her thoughts at data trends blog.