Where crypto once found itself confined to a limited number of tech-savvy individuals, it has since become mainstream as more people develop an interest in digital currency – all thanks to COVID-19. The now infamous global virus did not stay within the realm of health, even affecting the world economy at large.
From traditional financial structures to our day-to-day lives, everything has changed in this dynamic situation, with the monetary system and our finances among the hardest hit. But despite this, many have found opportunities throughout the uncertainty of the past year.
If you are considering entering the volatile world of cryptocurrency, it is vital to consider the many factors that can influence a digital currency’s price. With things like the COVID-19 pandemic affecting nearly every aspect of our lives from personal to financial, there is a strong case to be made for a multi-year bull run in the world of digital cryptocurrencies.
Bullish on Bitcoin
Last May, Bitcoin saw a huge breakthrough when its value rose above a seemingly long-term declining trendline. But as with any asset, let alone one as volatile as BTC – there comes a set of factors that can either help overall influence or deter progress on the presence of crypto in traditional finance.
BTC is the most popular cryptocurrency, as well as the most valuable in terms of market capitalization. Because of this, many argue that BTC is the best digital currency to invest in, period.
If we take a cryptocurrency such as XRP’s Ripple and compare it to BTC – the Bitcoin price is much higher because its supply does not go up more than demand increases. Inversely, XRP’s value is not anywhere near that of BTC because of its abundant supply.
The scarcity of Bitcoin – whether real or perceived – is just another bullish factor to consider when jumping into the market. Anything remotely related to economics is at the mercy of a few simple factors, like supply and demand.
Shifting Public Sentiment
Suppose there is one thing that has a massive influence on just about everything. In that case, it truly is the power of media – with mainstream media news outlets, once word gets out about something, it quickly spreads like wildfire around the globe, and this is what we have come to know as virality.
With current events and the many day-to-day happenings of the real world, it’s easy to forget that these factors cause changes in the demand of a cryptocurrency, and thus changes in its value. Therefore, even a brief mention of cryptocurrency by the media is responsible for influencing a substantial increase in the value backing these assets.
Growing Use Case
With each crypto comes a unique usage or use case.
For example, Bitcoin offers peer-to-peer transactions, which are sought after amongst people carrying out larger-scale financial transactions. This factor has made BTC the first choice for many and helped it gain popularity among the rest.
By large, we do not know what usages will be considered more practical in the future, and therefore how it will shape the crypto scene. Outside of clearly defined cryptocurrency products with distinct purposes and applications – the use case and potential of many blockchain projects remain in the hands of speculators, for now.
Despite this, it is no surprise we have began to see cryptocurrencies without a clear use case or purpose start waining in popularity, with others dropping off significantly in terms of general crypto public awareness.
Legislation and Regulation
Regardless of a cryptocurrency such as BTCs popularity, the rules and regulations, or lack thereof, surrounding it are subject to uncertainty and complications. While various legislators have accepted exchanges in cryptocurrency as legal, it is still not considered legal tender in many parts of the world.
Disclaimer: If you plan on dealing in crypto, you should first check the regulations regarding cryptocurrency in the area you reside in for several reasons – namely, you do not want to get caught in any legal issues because of carelessness.
Before making your move into cryptocurrency, consider going over this article a few times, taking into account the previously mentioned factors while keeping the volatility of digital currencies in mind.
With price volatility being another reason for such high profitability within the space, as high volatility opens the door for even higher returns, it is wise to take advantage of these fluctuations when the opportunity presents itself. By neglecting to be mindful of this seemingly small factor, one can make a world of difference in how far a principle investment could go.
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