Investment in cryptocurrencies has become a major trend worldwide, as it ensures security, anonymity, and probable capital gains. But a lot of us (including myself as of two days ago), lack adequate knowledge with respect to market value, and as to what extent various variables have on the pricing of these currencies. Take for example, a snapshot below from coinmarketcap.com:
For a novice, at first glance, the only thing that stands out is the market price of the Steem currency. For the most part, we are ignorant to other variables such as the 24H Volume, Market Capitalization (Market Cap), Circulating Supply, and the Total Supply, and as to what extent each go in determining the market price of the currency.
24H VOLUME : The volume of a cryptocurrency refers to the amount of its coins that has been traded (bought an sold), in the last 24 hours. This reflects and compares how many people are buying and selling the coin. The volume of a currency is related to a price increase or reduction of such currency. An increase in volume shows a lot of people are making transactions on the currency, and if it continues as such the price would likely increase gradually. However, a drop in the price, would reflect as only a small amount of people are presently engaged in the transacting the currency. Thus, from the movement in the volume of a coin, one can be able to develop an opinion of the market.
MARKET CAP : From the snapshot above, it is seen that the rank of Steem is currently 28 among other cryptocurrencies. The Market Capitalization is a way in which the performance of a cryptocurrency is ranked. It is the aggregate valuation of a cryptocurrency based on its current market price and the total number of circulating supply. It is calculated by multiplying the market price of a cryptocurrency with the current circulating supply.
CIRCULATING SUPPLY : This is a closely estimated number of coins that are circulating in the market and are currently been held by people.
TOTAL SUPPLY : This is the total value of a cryptocurrency supply available in the market at a specific time.
MARKET PRICE : The price of various cryptocurrencies are determined by taking the volume weighted average of all prices reported at the particular coin's market, which can be found in the market page of the cryptocurrency.
Other internal factors that may cause a positive fluctuation in the price of a cryptocurrency includes, but not limited to the following:
CONCLUSION
Basic understanding of a few of the factors that determine the value of a cryptocurrency will not necessarily make it more predictable. However, understanding them can help you to be more knowledgeable about what can affect your investment, and thus, will help you make more informed decisions at the right time.
