The first cryptocurrency, Bitcoin, having launched just ten years back, the cryptocurrency market is relatively new when compared to other trading institutions, and much more volatile. The last few years have seen the greatest wrath of its possible volatility, with huge surges and falls in the prices of some prominent cryptocurrencies. All that being said and done, the value of the cryptocurrency market surged exponentially in 2017, rising more than 1,200%, bitcoin being the largest beneficiary of the surge. Since then, 2019 has proven to be the best year with respect to the market capitalization of cryptocurrency.
With the growing popularity of cryptocurrency, several business sectors and governments’ are jumping on to the cryptocurrency wagon. Millions of amateur investors are finding their way into the market to invest, and try to reap benefits off the volatility of a cryptocurrency. There are no major barriers to joining in on cryptocurrency trading and all you need is a sound internet connection! The growing popularity of cryptocurrency in fact, can influence its price and lead to possible highs and lows in its value.
Can growing popularity boost the price of a cryptocurrency?
Yes, it can. Cryptocurrencies are decentralized and they cannot be manipulated and controlled by a central bank or a specific government. Factors that generally impact the price of fiat currencies are more unlikely than not to have a direct impact on cryptocurrency prices. Of the many factors that could affect the price of a cryptocurrency, its supply and demand is the main market mover. Here are a few factors that impact its supply and demand –
- The perceived popularity of a cryptocurrency
- News about a technical advancement, issue of fork
- A change in the legal status of cryptocurrency in a country
- The level of trust a cryptocurrency preaches and imbibes
- Statements made by policy makers
Factors that drive cryptocurrency popularity
While Bitcoin and all altcoins in the world do not quite yet have the market cap of big players in the trading market like gold and the share market, its potential is huge. A large investment made into a cryptocurrency, or a large withdrawal can have a significant impact on the market, which may even lead it to crash. Cryptocurrency being volatile in nature, there are a few factors that act as drivers in influencing the popularity of a cryptocurrency –
Working on the principle of supply and demand, the price of a cryptocurrency can surge due to speculation, drawing in more possible investors. Several cryptocurrencies have a fixed number of available tokens and investors may predict the price of a cryptocurrency to appreciate or depreciate. Experts predicting a possible rise and fall leads to popular opinion that there may indeed be a surge in its price, or a dip, leading those believing in their opinion to buy or sell their invested tokens.
The volatility of the cryptocurrency market is the biggest lure to investing in it. People are always on the lookout for positive or negative speculation with respect to a particular coin, reaping profits on the way, or losing sums of money. Popular opinion and speculative bets may lead to a rise in the price of a cryptocurrency, or its fall, as people join or leave the cryptocurrency world, thereby increasing the demand of a cryptocurrency, or reducing it.
Social Media Platforms and Media
Such is the growing popularity of cryptocurrency that nearly every other amateur trader has the desire to invest in a cryptocurrency. Most cryptocurrency amateurs either use social trading networks (like eToro) or trading bots. Social media platforms are aloof with speculative posts about the possible surge or dip in price of a cryptocurrency and when is the best time to invest and sell. People look to ride the wave of these opinions and enter the cryptocurrency world.
As per Iqbal Gandham, the UK managing director of eToro,
"I think the price rise and surge in interest fulfil and complement each other. As digital currencies rise in value, their appreciation generates interest from market observers, and this in turn helps fuel further price gains.”
Media hype fuels interest and ignites a rush to invest in a cryptocurrency. The first ones to a new trend, or observable truths about a market opportunity are more likely to reap more benefits than others. As mentioned before, most cryptocurrencies have a fixed number of tokens circulating in the market. The demand for such cryptocurrencies increases due to social media and media activities, hence leading to a rise in its price.
Conclusion on How can growing popularity boost the price of a cryptocurrency
Cryptocurrencies being volatile in nature and decentralized, there is not much control over its use and plausibility in terms of an investment. The supply and demand of a cryptocurrency being the major factor behind the rise or fall in its price, the popularity of a cryptocurrency and the factors on which the popularity depend on play a significant role in the fall or rise of its price.