We have noticed that the crypto era has just begun and experts claim that in the coming decade cryptocurrency will be able to replace any other form of currency, this has set high hopes for investors and it will be a great digital revolution.
But there are some major concerns related to cryptocurrency which are to be dealt with and taken care of first and these are legally binding, rates fluctuation, charges, and many more.
So in this article, we will be discussing the major concept of working of crypto trading, and further, we will discuss various factors which cause crypto pricing fluctuation in various trading platforms.
What is the main concept of crypto trading?
In the year 2017, the world experienced a sudden rise in the number of crypto owners as it was limited and the value of crypto was quite too low but soon there was a flourishing demand for such currency.
When the need for this currency spread then people came forward and started investing more in crypto which resulted in high Demand and we know that when there is a high demand and low supply then the price flies over the roof.
Soon the prices of crypto were high and investors could see the hefty profits they were gaining. So crypto rates are mainly affected by the simple concept of “Demand and Supply” and once all the cryptocurrencies are mined then the supply will end and Demand will be high then there would be some major rise in the value of crypto. Go URL to find more.
The factor that affects crypto exchanges on different websites
Instability in the pricing of cryptocurrency still stands as a disadvantage for pricing and further various trading platforms offer different prices for cryptocurrency so let’s discuss them.
Various factors highly influence the working and pricing of crypto trading and some of them are listed and discussed below.
1. Demand and Supply
The simple concept of Demand and supply controls greater markets at a fundamental level as you will notice that when there is a limited supply and increased demand then prices go high and when there is surplus supply and surplus demand then prices remain average or low.
So the Demand for crypto is the major reason which brings these tremendous changes in its pricing.
2. No central body to govern prices so it’s based on trading
There is no central body that would regulate crypto prices, they completely depend on the amount of trading and number of exchanges made in the certain market. When there is no particular body to govern its prices, various trading platforms set different prices for these cryptocurrencies.
3. No trading apps sync
The trading or brokering applications that allow users to connect and trade in cryptocurrencies aren’t connected by any global organization which binds them together.
So you would notice irregularities in their prices which can be eventually seen that they do not have matching prices.
4. Price is decided after the upper and lower limit
The cryptocurrency value is determined based on the demand in the market which goes like, what amount is the highest bidder ready to pay and what is the amount which the lower bidder is ready to pay, and then the average of these prices forms the bitcoin price.
If the lower bid keeps getting bigger then the price of crypto will rise whereas if the higher bid keeps getting lower then the prices of lower crypto will fall.
5. No laws against manipulating the market
Cryptocurrency and crypto stocks aren’t recognized by many countries yet so there are no legal rules or legal bindings against them. Like in the stock market the stock manipulation is a punishable crime, in the same way, there is no law against it yet.
So if someone manipulates the market and causes a fluctuation in the crypto market then it won’t be considered a crime because there is no law against it.
6. Size of the market affects prices
As we have already discussed the core reason for trading which is demand and supply, the same is applicable here. In some country’s markets, there is a small market so they will get smaller funds and thus they will be able to buy less crypto.
If the availability of crypto will be less then surely its demand will rise so the rates of crypto in that market and other markets will vary with enough margins.
7. Exchange volume
In every market there are two types of investors, one referred to as normal investors are called the big fish of the market or “whales”. These whales of the market hold ample amounts to cause disruption and changes in the prices of crypto and therefore they can cause fluctuations according to their will in the market.
This is one of the major reasons for crypto pricing fluctuations.
8. Fees and Taxes
Different trading platforms charge their clients differently based on their charges and transaction fees and this is included in the pricing of crypto and that is why you will see that often traders in the same market will ask for different rates of the same cryptocurrency.
Each trading platform has its different charges and transaction fees.
9. Foreign charges
People often think that investing in the different markets can bring them profits, this can be easily understood with an example.
Suppose you notice that the prices for Ethereum are 4,600 in BSE and its value is 4,500 in NSE so you might think that it’s good now I will buy Ethereum in NSE and then I will be able to make a 100 unit profit but this does not work that simply.
Firstly you need to transfer your money to a foreign account and once you have done this then you will notice that you have been charged a high fee for making a foreign investment and then on all your transactions you will notice that fee being deducted.
So this does not make a profitable transaction.