With a lot of crypto assets being there in the Crypto World, one must be aware of the fact that they are interdependent. The factors that affect their nature of dependence might depend from one asset to the other in a given frame of time. The rates of all cryptocurrencies depend on each other. This is because of their volatility, market movements, governance of administration, and availability on different platforms. With all the factors being highly related and coherent with each other in various terms, one must be sure that things are taken into consideration before taking a leap in the financial world executed by these virtual assets. Thus, below is a list of factors upon which the crypto factors are dependent.
- Volatility
Cryptocurrencies are volatile and are correlated to each other’s market prices. Volatility or unpredictability means that they might change drastically within a short period. The change in the price range of cryptocurrencies can either be positive or negative. The latest cryptocurrency news shows that the prices of various cryptocurrencies fluctuate every day. For example, they may increase during the day and decline at night. The reason why the rates of all cryptocurrencies depend on each other is that they often change at the same time. Their price movements are similar, too.
For instance, if the value of Bitcoin goes up by 10 percent, it will make all other coins rise as well by an average of 5 percent within a few minutes. Such events occur when there is a major news release concerning digital currencies. If one coin increases in value, it will cause other coins to rise in price too because people will start buying them more actively than before.
- Price dependent
The higher cryptocurrency prices attract investors who have sufficient capital for trading purposes but not enough time for monitoring the market constantly throughout each day’s trading hours or even weeks at a time – some days may see large swings in value; however, most days see slight changes. But, the price swing is somewhat one of the two categories of decreased or increased depending on the factors posed by employment. The value of cryptocurrencies is affected by other markets, such as stocks or commodities. If there is an increase in demand for gold, this could cause prices to rise. Similarly, if there’s an increase in demand for oil, this might cause prices to drop.
The rates of all existing cryptocurrencies are highly correlated with each other. If the price range of the initial virtual currency and the major holding being bitcoin falls, the price of altcoins will also fall, and if bitcoin rises, then altcoins also rise. The degree of correlation depends on several factors:
- Governance of administration
The way that the administration of each cryptocurrency is structured can have a big impact on its price. Crypto assets are decentralized ledger-based network platforms where individual users run their nodes. This means there’s no central authority controlling or regulating these currencies – they operate independently from any government entity or corporation.
Such cryptocurrencies as XRP and XLM have a strong centralized structure and depend on their management.
- Availability on different platforms
Cryptocurrencies may also be available through different platforms, such as exchanges or wallets. Cryptocurrencies are becoming more popular, but many people still don’t believe in their potential. Of course, it is hard to say for sure if a cryptocurrency will succeed, but it is important to understand that the rates of all cryptocurrencies depend on each other.
These platforms have different rules about allowing people to buy and sell their currencies, so if someone wants to purchase an alternative coin like Monero but doesn’t have access through an exchange.
When there are few exchanges where you can buy any cryptocurrency, then its rate is more dependent on market conditions than on the situation with bitcoin. And vice versa – when there is a possibility to buy altcoin on every exchange, its rate depends more on how bitcoin behaves.
Final words
Given above is a list of some factors that govern the various kinds of swings in the crypto world due to different execution reasons and hence have a major role in the execution of the crypto world in the present scenario when cryptocurrency is becoming an important part of the investment portfolio of the individuals.