Why is the rate of cryptocurrencies constantly changing?

Fluctuations in the spot rate of cryptocurrency on exchanges are caused by many factors.

Factors that influenceon the cryptocurrency rate, divided into internal and external. First let's deal withinternal factors:

Mainstream

The behavior of traders directly affects the rate of digital currencies. The activity of large players in the market changes the mood of retail traders, which leads to an increase or decrease in prices. 

At the same time, the behavior of small and medium-sized traders becomes more predictable, which allows for more effective use of technical analysis and predictive techniques. 

Cross-rate effects

Financial flows in the market flow from onecryptocurrencies to another. So, with an increase in the price of bitcoin, altcoins may sink, as some traders convert them to BTC. Conversely, at the beginning of the "altcoin season", the main financial flows are directed to alternative tokens, which hinders the growth of the first cryptocurrency.

Liquidity

Liquidity refers to the availability andthe rate of exchange of cryptocurrencies for fiat or vice versa. If liquidity in the market is low, it negatively affects the price of the cryptocurrency and makes it unstable to sudden price changes.

Now let's considerexternal factorsthat affect the pricing of the crypto market. Among the main ones are:

Economic

The COVID-19 pandemic has led to the adoption of packagesincentives around the world and to the devaluation of national currencies. Inflation, a decrease in purchasing power, and depreciation of assets have provided an influx of investment in alternative methods of storing valuables – crypto. 

Geopolitical 

Political market events have a direct impact on cryptocurrency pricing.  

Thus, Brexit in the UK stimulated demand for Bitcoin. 

Regulators

Regulatory policies of countries in relation to digitalassets directly affects their price. Any statement on the recognition of cryptocurrency has a positive effect on the price of bitcoin. Jurisdictions with clear legislation aimed at protecting investors are helping to attract more traders to the crypto market.

Technological

Development and updating of software also affects the demand and price of an asset. The upcoming launch of Ethereum 2.0 has given a powerful boost to Ether's soaring above $ 1000.

The introduction of financial products such as Bitcoin futures and options has attracted institutional investors, increasing the price of the asset.  

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