The way in which the prices of cryptocurrency and altcoins developed over the years has revealed a trend that is different from traditional market patterns, especially since the crypto market is still in its infancy. This new pattern of development gives rise to diverse opinions that attempt to properly explain why the markets are unfolding in such a unique manner. Therefore, several arguments and conspiracy theories are currently circulating as to the actual factors that influence the growth of specific altcoins.
Top players within the crypto industry, especially the innovators, founders, and major project investors, are often accused of engaging in unethical actions in order to achieve personal gains. This accusation stems from the unconventional patterns exhibited by most cryptocurrency price movements. Some of the factors that are responsible for the price development patterns of bitcoin and altcoins are explained further in this article.
Fundamental economic factors that revolve around supply and demand are described by some as the main reason why cryptocurrencies witness the kind of price movements that they exhibit. This is explained by the fact that cryptocurrencies almost always have a limited supply. Therefore, as more people join in and buy into any given altcoin, its scarcity level increases and raises the price value. The opposite happens when there is a significant selloff as well and prices fall.
The events over the past year involving bitcoin and cryptocurrencies have made the technology very popular. It doesn’t matter whether these happenings had positive or negative influences over technology, as the one thing that is undeniably achieved in the process is increased awareness. The popularity of the crypto ecosystem grew significantly in 2017, and so did the price of bitcoin and most altcoins. Increased awareness naturally generates curiosity, hence, as the concept reaches more people, more people want to engage with the new technology.
This factor hinges on a controversial idea of using certain influence, such as personal popularity, to boost the price of a coin at a given time. One of the most notable downfalls of this system has seen the founder of Litecoin, Charlie Lee, sell all of his LTC holdings. Lee explains in a post on Reddit that his action is born out of a conflict of interests, as he attempts to show that his public actions or comments are not motivated by ulterior motives. He said that he is sometimes accused of talking about digital currencies on Twitter for personal benefits:
"Pump and dump" is a form of investment fraud that has played out within the crypto market in a big way. Due to the unregulated nature of the industry, and the ease with which ICOs have been setup and executed, some insincere players take advantage of this gap. These individuals deliberately create a product, and then create demand that pushes up the price of the product. Inexperienced investors get sucked in and push the price even higher by the buy-in actions. Then, the architects of the scheme sell-off their holdings and leave the coins crash until they hold no real value. The inexperienced investors lose their investment.
Other factors may influence how cryptocurrency prices are determined, such as market sentiments, panic based on current events, improved partnerships, and product development, to name a few. However, the nascent stage of the industry implies that the reactions to events surrounding the industry will continue to have significant effects on crypto prices until the industry achieves a more robust capitalization. Hence, the volatility that exists within the markets must be embraced as a development aspect that will be with us for a while.
Top players within the crypto industry, especially the innovators, founders, and major project investors, are often accused of engaging in unethical actions in order to achieve personal gains. This accusation stems from the unconventional patterns exhibited by most cryptocurrency price movements. Some of the factors that are responsible for the price development patterns of bitcoin and altcoins are explained further in this article.
Organic growth:
Fundamental economic factors that revolve around supply and demand are described by some as the main reason why cryptocurrencies witness the kind of price movements that they exhibit. This is explained by the fact that cryptocurrencies almost always have a limited supply. Therefore, as more people join in and buy into any given altcoin, its scarcity level increases and raises the price value. The opposite happens when there is a significant selloff as well and prices fall.
Awareness and adoption:
The events over the past year involving bitcoin and cryptocurrencies have made the technology very popular. It doesn’t matter whether these happenings had positive or negative influences over technology, as the one thing that is undeniably achieved in the process is increased awareness. The popularity of the crypto ecosystem grew significantly in 2017, and so did the price of bitcoin and most altcoins. Increased awareness naturally generates curiosity, hence, as the concept reaches more people, more people want to engage with the new technology.
Deliberate acts:
This factor hinges on a controversial idea of using certain influence, such as personal popularity, to boost the price of a coin at a given time. One of the most notable downfalls of this system has seen the founder of Litecoin, Charlie Lee, sell all of his LTC holdings. Lee explains in a post on Reddit that his action is born out of a conflict of interests, as he attempts to show that his public actions or comments are not motivated by ulterior motives. He said that he is sometimes accused of talking about digital currencies on Twitter for personal benefits:
"Some people even think I short LTC (litecoin)! So in a sense, it is conflict of interest for me to hold LTC and tweet about it because I have so much influence. I have always refrained from buying/selling LTC before or after my major tweets, but this is something only I know. And there will always be a doubt on whether any of my actions were to further my own personal wealth above the success of litecoin and cryptocurrency in general."
Pump and dump:
"Pump and dump" is a form of investment fraud that has played out within the crypto market in a big way. Due to the unregulated nature of the industry, and the ease with which ICOs have been setup and executed, some insincere players take advantage of this gap. These individuals deliberately create a product, and then create demand that pushes up the price of the product. Inexperienced investors get sucked in and push the price even higher by the buy-in actions. Then, the architects of the scheme sell-off their holdings and leave the coins crash until they hold no real value. The inexperienced investors lose their investment.
Other factors may influence how cryptocurrency prices are determined, such as market sentiments, panic based on current events, improved partnerships, and product development, to name a few. However, the nascent stage of the industry implies that the reactions to events surrounding the industry will continue to have significant effects on crypto prices until the industry achieves a more robust capitalization. Hence, the volatility that exists within the markets must be embraced as a development aspect that will be with us for a while.