The invisible hand: What drives the Crypto market?
The crypto market has gone from an unknown place to the talk of the town. Casual viewers have become interested in this market ever since Bitcoin surpassed the $10,000 as 2017 reached an end. But what are the forces behind cryptocurrency? How does the industry decide coin’s values or who gets to join this selective marketplace? The reality is that it is a very dynamic environment that is continuously evolving. Anything from news to a tweet affects the cryptocurrency market. However, we must understand the coins to understand the forces behind it.
It is no secret that cryptocurrency owes its success to early adopters, crypto enthusiast, promoters, and users. Bitcoin and Altcoins have benefited from this undying support. But, momentum shifted when perception changed from an online idea to a way to store value and payment mechanism.
From the cryptocurrency field, Bitcoin leads the way to become a legitimate form of payment. And it is this change in notion part of the reason why the coin has increased in value. Japan and Korea are nations known to have part of their industries accept Bitcoin as payment before other business adopted the cryptocoin. So demand for Bitcoin leads to higher prices as supply could not keep up with the quantities demanded.
But that’s the case of Bitcoin. Not all coins are subjected to the simple law of supply and demand. In fact, most altcoins are affected by other factors.
Market Cap and ICO
The first cryptocurrencies depended on their user base to increase the value of the currency to a level where further development could be justified. Ethereum changed that by introducing Initial Coin Offerings (ICO). These offerings allow projects to be funded by trading the newly minted cryptocurrency for some better-known coin like Ethereum or Bitcoin. It works similarly to an IPO, but with the bonus that it is no controlled by a financial institution that wants to squeeze the valuation of the coin.
The combination of an influx of money and the growing interest by the general population has created a market where coin supply, demand, and speculation meet. As of this writing, these are the ten most valuable coins in the world.
- Bitcoin (BTC)
- Ethereum (ETH)
- Bitcoin Cash (BCH)
- Ripple (XRP)
- Litecoin (LTC)
- IOTA (MIOTA)
- DASH (DASH)
- Cardano (ADA)
- NEM (XEM)
- Bitcoin Gold (BTG)
The position can always change. But as it can be appreciated the top ten shares one trait in common, value offered.
The last piece of the puzzle relates to what cryptocurrency brings to the market. Not all coins are created equal. Some were part of a joke, like Dogecoin, while others are intended to be used as means of exchange, like Ripple. It is this value-added why the demand for every coin ever made changes.
Pundits and naysayers want to believe this is nothing but a bubble. The reality is that the crypto market is more than that. Unlike the dot-com bubble of the early 2000’s or the financial crisis of 2008, the cryptocurrency is being driven by the people. No single institution is trying to sell toxic assets. The people decide who gets to go up or down the market. It is this freedom and decentralisation the actual force behind the cryptocurrency market.