Ask someonehow cryptocurrency prices work. Youll probably get an answer like its supply and demand.

Thats absolutely true: at the core of cryptocurrency prices or the price of any asset liessupply and demand.

However, theres much more to crypto prices than just paying one price and selling at another. Chrisjan Pauw decided to explore the issue last week in a piece titled,

In that piece, Pauw provides a great overview of the economics behind crypto prices, including how theyre different from the prices of traditional assets.

The biggest difference between cryptocurrency values and fiat money is that fiat currencies are backed by central governments and declared as legal tender. Its value is basically derived from the fact that the central government has stated that it has value and two parties in a transaction put their trust in that value.

Cryptocurrencies, meanwhile, lie outside the control of a central government or authority and are not accepted as legal tender in most places. With that in mind, lets look at some of the basic facts behind how cryptocurrency prices work, as explained by Pauw:

Cryptocurrency gets its value from supply and demand. Fiat currencysort ofderives its value from supply and demand, but its more insulated from market pressures.

Pauws answer to the question above is simple. Its still a nascent market.

The cryptocurrency market is still considered very new and, beyond hearing the term cryptocurrency, most people are still very much unfamiliar with the industry. Nascent markets have a number of qualities that make them inherently volatile.

Some of those inherent qualities include a lack of liquidity, including a lack of activity in foreign exchange markets.Bitcoin trading, for example, is dominated by US Dollar, Japanese Yen, and Korean Won trading. Forex markets, where fiat currencies are traded, are much more diverse:

Daily cryptocurrency trading volumes are around the $14 billion mark, while daily forex trades are closer to $5 trillion. The spread the difference between the buy and sell price on foreign currency trades will be a few pennies at the most, while spreads on cryptocurrency trades can be as high as a few dollars.

Today, crypto trading is dominated by a few centralized crypto exchanges. These exchanges provide a centralized point of failure.

Supply and demand is the most important determinant of cryptocurrency prices,

explains Pauw. This is a basic economic principle. Tokens with little demand from traders and users will drop in price, assuming all else remains equal.

This is the same reason why scarcity drives up the price of bitcoin. As media attention andthe technology grows, demand for the currency rises. Supply, however, hardly increases.

Other factors that affect demand include token utility (the usefulness of a token) and the usefulness of itsunderlying blockchain platform.

Mining difficulty also factors into the system. Its harder to increase the supply of a coin with a higher mining difficulty.

Finally, Pauw explores the price of cryptoassets over the past 18 months.

Tracking the price of bitcoin gives us a good indication of the overall cryptocurrency market in the past 18 months.

Bitcoin began the year 2017 at a price of $1,000, then traded to lows of around $775 when China started investigating crypto exchanges. TheSEC rejected a bitcoin ETF in March 2017, dropping the price further, and then Japan declared bitcoin a legal currency and the bull run continued past $3,000.

There was the BCH/BTC split, when the price of bitcoin dropped to $2,000 in the leadup to the split, and then there was the bull run in August, when the price of bitcoin surged after the split. The bull run continued all the way to December 2017, when BTC peaked at $20,000 (with BCH at a peak of around $3500).

2018 has been more tumultuous. Weve been in a bear market since December.Google, Facebook, and Twitter banned crypto adsearlier in the year, causing crypto markets to sink even further. As late as July 2018, bitcoin was hovering around the $6,000 mark. Today, it sits over $8,000.

What can we learn from these price movements? Well, we can learn that the price of bitcoin is affected by a number of different things from governmental policies to media attention to hacks. By studying bitcoins price history, you can make reasonable predictions about its price future.

What about bitcoin price predictions? Are there actually people, algorithms, or platforms that can predict the price of cryptoassets in the future?

Like with traditional markets, there are no guarantees when it comes to future price predictions for the cryptocurrency market,

Some have predicted bitcoin will break $1 million, for example. Others believe bitcoin will be worth $0 in the near future. One of these could be right or neither.

Ultimately, cryptoassets and fiat assets have varied widely in price both for widely different reasons. By studying the past price history of cryptoassets, we may be able to make reasonable assumptions about the future or the future might completely rewrite every price prediction algorithm as we know it.

*Action*Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

I will never give away, trade or sell your email address. You can unsubscribe at any time. Cryptocurrency Roulette Betting Platform With Bitcoin Rewards Launches

Cloak Phone: Blackout Mobiles John McAfee-Backed Blockchain Luxury Privacy Smartphone Launches

B.E.G. Editorial Team is a gracious group of giving cryptocurrency advocates and blockchain believers who want to ensure we do our part in spreading digital currency awareness and adoption. We are a team of over forty individuals all working as a collective whole to produce around the clock daily news, reviews and insights regarding all major coin updates, token announcements and new releases. Make sure to read oureditorial policiesand follow us onTwitter, Join us inTelegram. Stay tuned. bitcoin

Find Us:Telegram\\Facebook\\Twitter\\Live Prices\\Todays News\\Bitcoin 101\\$BTC/USD Chart Analysis

[Alert] Use the authors self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses.Editorial Policy\\Investment Disclaimer

Save my name, email, and website in this browser for the next time I comment.

Find Bitcoin News, Crypto Prices and Coin Updates

The Asset Class of the Decade With 9,000,000% Gains Is Still in Danger of A Crash to $5,500

Bitcoin is ending the year at gains just below 90% around $7,150 While the asset class of the decade was recording 9,000,000% gains,…

Justin Suns BitTorrent Onboards Largest Decentralized Live Streaming Platform DLive

40% Of Hedera Hashgraph Council Nodes Drops Offline, HBAR Price Down 54% In Last 30 Days

Poloniex Exchange Users Urged to Reset Passwords After Email Data Leak on Twitter

Ethereum Muir Glacier Update: Parity Upgrade Alert Due to Attack, 75.7% of Node Operators Ready

Those running Parity nodes are asked to update their clients ASAP 75.7% of the node operators are ready for Muir Glacier Down 92%…

Over 49% Bitcoiners Believe the Bitcoin Price is Going to a $1 Million Dollars in the Next Decade

BTC ready to end 2019 with 92.5% and the decade at about $7,200 Currently, the market is in consolidation meaning weak die off…

Poll Hints Majority Doesnt See XRP Hitting $1 Ever, Is Ripple at Fault?

XRP is the second biggest loser among the top 10 cryptocurrencies of 2019 The digital asset to face selling pressure from Ripple and…

Ethereums Hard Fork Muir Glacier Launches In 2 Days, Will The ETH Community Be Prepared?

While the entire world is preparing for the New Year, Ethereum has scheduled Muir Glacier, its long-awaited hard fork, for January 1 of the…

Nearly 70% Of BCH Hashrate is Controlled by Unknown Mining Pools, Is A 51% Attack At Risk?

BitcoinExchangeGuide is a hyper-active daily crypto news portal with care in cultivating the cryptocurrency culture with community contributors who help rewrite the bold future of blockchain finance. Subscribe onGoogle News,see themissionauthorseditorial links policyinvestment disclaimerprivacy policy. GotNewsContact us, we are human too.Note: nothing here is financial advice, do your own research thoroughly.

Bitcoin Exchange Guide is a hyperactive hybrid of heavy-handed cryptocurrency content curation creators from christened community contributors who focus on delivering todays bitcoin news, cryptoasset user guides and latest blockchain updates.

CNBCs Delivering Alpha Panel Hosts Circle and Digital Currency Group CEOs: Crypto Assets Are Here to Stay

Jeremy Allaire and Barry Silbert Tell CNBC, Crypto As an Asset, it is here to stay The CEO of Circle and Digital Currency Group, Jeremy…

Blockchain Technology For Remittance Money Transfers: Real World Benefits?

Will Blockchain Actually Help To Speed Up Remittances? Some people in the financial market argue that blockchain will not help banks to speed up remittances….

Monetary Authority Of Singapore Grants CapBridge Private Security Token Exchange License

Monetary Authority Of Singapore Grants CapBridge RMO Private Exchange License CapBridge Pte Ltd., a global private capital firm, recently announced that it has received approval…

The Crypto Market Operates Stable After Bithumbs Loss of Cryptocurrencies

Bithumb, one of the most popular crypto exchanges in the world and in South Korea, has been attacked once again. The company blocked withdrawal…