Crypto Prices: Why Do They Change?

Cryptocurrency has been on the market for over a decade, but many professionals and industries have only recently looked seriously at incorporating cryptocurrency and related technologies into their daily operations. While several aspects of cryptocurrency show promise for industry use, the high volatility of prices may cause concern for those looking for more stable financial investments. As cryptocurrency continues to rise in popularity, many people wonder what influences the price of cryptocurrency coins and what can we expect from future prices. 

Whether your interest in cryptocurrency is as a hobbyist or professional, learning how and what influences cryptocurrency prices can help you read market trends, understand the effect of current events, and make smarter financial decisions when investing, selling, or trading coins. To begin a career in cryptocurrency, learning what factors determine cryptocurrency prices can deepen your understanding of cryptocurrency and provide a foundation to advance your knowledge and skills toward future goals.

Read more: How Does Cryptocurrency Work? A Beginner's Guide

What is cryptocurrency?

Cryptocurrency is a type of digital currency that keeps transactions secure using cryptography. To understand cryptocurrency, you’ll find it helpful to learn about the base technology. This technology is blockchain technology. Blockchain technology is a decentralized network stored on computers all over the world. Every time you buy, sell, or trade a cryptocurrency coin, a record of this event is added to the blockchain as a “block.” This makes records of cryptocurrency transactions and ownership undisputable and transparent. 

Blockchain technology applies to many industries, such as finance, law, supply chain management, media, and health care. Certain functions, such as automatically completed contracts, also called smart contracts and peer-to-peer transactions, attract professionals in different industries. As new blockchain applications become apparent, new career opportunities will likely emerge. Understanding cryptocurrency and its influences on crypto pricing can help you deepen your knowledge and build a strong foundation for developing additional skills.

Read more: What Is a Cryptographer? Career Guide

What influences cryptocurrency prices?

Several factors influence the price of cryptocurrency. Because cryptocurrencies aren’t backed by the government or any other central authority, their value is determined in other ways. A few of the main factors you can expect to affect cryptocurrency prices include:

Read more: The Crypto Market Cap: A Guide for Beginners

1. Market capitalization

Market capitalization, also known as market cap, is the result of multiplying the value of an individual coin by the number of coins on the market. Coins with larger market caps are thought to be less likely to experience large fluctuations in value than coins with smaller market caps. However, the nature of cryptocurrency is volatile, and even coins with large market caps are prone to swings in value.

2. Node count

The node count of a cryptocurrency coin represents how many active wallets are holding the coin. This gives you a metric of the community around this particular coin and the decentralized network's size. Generally, a coin with more nodes is thought to be less volatile. 

3. Cost of production

The cost of production for coins will also affect their prices. Cryptocurrency coins are usually mined, requiring miners to have specialized computer systems that allow them to bring new coins to the open market. If the cost of producing one coin is higher than the cost of producing another, it is likely the coin with the higher production cost will be more expensive to purchase. If the production cost changes, this can influence the coin's price. However, more data is needed to fully understand how production costs alter crypto coin pricing.

4. Supply and demand

Supply and demand are some of the central factors determining an asset's price, and cryptocurrency is no exception. The price is likely to be lower if supply is abundant and demand is low. If the supply is low and the demand is high, the price will likely be higher. When looking at cryptocurrency prices, the number of coins available and the number of people who would like to purchase a coin affect the coin’s value. When these factors change, so does the value. 

5. Competition

The number of competing coins will likely influence the price of any particular coin. This ties in with supply and demand. If an ample supply of a cryptocurrency coin exists, but buyers are more interested in competing coins, then the price will likely decrease. However, if the coin supply is lower than the number of buyers motivated to acquire that specific currency, the demand will increase along with the price. 

One example of this is Bitcoin. Bitcoin was the first cryptocurrency coin available and initially dominated the marketplace—in 2013, Bitcoin had 95 percent of the market cap. However, as competing coins hit the market, Bitcoin lost some of its dominance in the industry. As of 2024, Bitcoin hovers at around 51 percent of the total market cap [1]. However, despite more competition, Bitcoin prices have remained high.

6. Mass adoption

Also directly related to supply and demand, mass adoption has the potential to drive up the price of cryptocurrency and cause significant price changes. If more people want coins than are available, the supply will be lower than the demand, and the price will likely increase.

7. Social and mass media

As social media and technology use expand in our society, social and mass media serve as vital influences on the price of cryptocurrency coins. Social media influences and mass media campaigns have shown the power to influence the demand for certain coins, which can affect whether the price rises or drops. 

8. Regulations from central authorities

If cryptocurrency becomes a mainstream form of currency, the potential for more regulations to be imposed on coin production and pricing from central authorities will rise. While this is yet to happen, experts speculate that regulations could significantly impact cryptocurrency coin value. For example, if a country or government outlaw cryptocurrency use, it could reduce the coin's utility and value.

Read more: What Is Bitcoin? (How It Works, Benefits, and Uses)

Will cryptocurrency rise in value over time?

Whether cryptocurrency will rise in value over time is a hot debate among many financial experts, and you won’t find a definitive answer. While opinions from investors, analysts, and researchers vary, many predict that cryptocurrency coins will grow in long-term value. However, high volatility and uncertainties related to factors such as future regulations, mainstream adoption, and production costs make it difficult for experts to agree on the future of cryptocurrency. 

That said, many industries are beginning to adopt cryptocurrency and blockchain technologies. Blockchain skills are widely considered a valuable asset for new hires, and new jobs in the crypto industry pop up every day. While the future of the crypto world is uncertain, having a solid basis in cryptocurrency and understanding the factors that influence its value can help you navigate the changing field and apply your expertise to new areas and opportunities as they arise.

Learn more about cryptocurrency prices and related knowledge.

Cryptocurrency is a hot topic across industries, and prices widely fluctuate thanks to changing market capitalization, supply and demand, and competition from new coins. If you’d like to know more about cryptocurrency coin prices, understanding the crypto market and what influences coin values can help you build your knowledge. A course or Specialization in cryptocurrency is a great way to gain structured knowledge of cryptocurrency foundations, applications, trends, and future directions. 

On Coursera, many courses and Specializations are available for beginners, such as Fintech: Foundations & Applications of Financial Technology, offered by the University of Pennsylvania, and Blockchain and Cryptocurrency Explained by the University of Michigan. For more advanced knowledge, intermediate Specializations like Decentralized Finance (DeFi): The Future of Finance by Duke University is a great option. Cryptocurrency is an expanding field, and taking the time to understand the basics can set you up to take more advanced courses or certifications.