If someone decides to buy cryptocurrency, it is important to be aware that they are moved by other laws than classic investment instruments such as stocks or bonds. This is because it is often not backed by a company or state, so there is no reviewable company balance sheet, annual/quarterly report, the economic performance of the given country or other usual financial indicators. Compared to traditional currencies, they are not issued by a central bank or government, so cryptocurrencies are not generally affected by monetary policy, inflation rates or economic growth.
In contrast, it is affected by many market factors, including:
The price is mainly influenced by the supply and demand of the given cryptocurrency.
The number of rewards after mining, if the given coin can be mined, as this is actually the inflation rate of the coin, which is regulated through the rate of issue.
Awareness of the given coin, number of users and areas of use.
The growth potential of a given cryptocurrency.
The number of cryptocurrencies competing for investors ’money’.
The number of exchanges on which the given cryptocurrency is traded and the liquidity available there.
Regulations and laws governing the operation, trading and distribution of a given coin.