Part One:
Cryptocurrency markets move according to supply and demand.
We often hear the term that the market moves based on supply and demand, while many of us find the answer to the question of who controls the price of digital currencies and whether the platform is the one that determines the rise or fall of the price. To answer this, we must first understand the meaning of the principle of "supply and demand."
The principle of supply and demand is the main factor that affects the digital currency markets. If the number of available coins increases (as happens in halving events or changes in mining rewards), which is called supply, this may lead to a decrease in price if there is no increase in demand. While when interest in digital currencies increases by investors or companies, demand increases, which leads to higher prices.
In general, supply and demand are the basis for understanding cryptocurrency price movements.
However, since cryptocurrencies are decentralized and users trade them through centralized platforms and decentralized wallets, they tend to remain free from many of the economic and political concerns that affect traditional currencies. While there are still many factors that drive cryptocurrency prices and build their market value, some of which have an impact on the general atmosphere and sentiment of the market. News, social media trends, and investor sentiment can lead to rapid changes in prices, in addition to trading volumes or what is known as liquidity. Higher trading volumes generally lead to more stable prices, while low liquidity can cause sharp price fluctuations. Economic conditions, such as inflation or interest rates, are also factors that can affect investing in cryptocurrencies as an alternative asset. Hacks, fraud, or breaches can also erode trust and negatively impact prices.
These factors often interact in complex ways, resulting in a dynamic and frequently volatile market environment.
