What determines the price of cryptocurrencies?
Cryptocurrencies are a tradable asset, much like stocks, commodities, securities and so on. Their price is determined by how much interest there is on the market in buying them – that’s called demand – and how much is available to buy – that’s supply. The relationship between the two determines the price.
If there is significant demand for a particular coin, but the currently available supply is limited, then the price increases. The demand for coins sometimes rises regardless of the currency’s true value – this is termed overbought. Alternatively, if a significant quantity of a coin is sold without a solid reason, it is described as oversold.
CRYPTO PRICE ESSENTIALS
° Price is determined by the relationship between supply and demand.
° The total amount of most cryptocurrencies is limited by max supply.
° Overbought coins are in high demand and are usually expensive.
° Oversold coins are in high supply and are usually underpriced.
