One of the main factors driving Bitcoin's price increase is the speed at which new consumers buy and explore cryptocurrencies, Waltman says. The value of cryptocurrency is determined by supply and demand, just like anything else people want. If demand increases faster than supply, the price rises. For example, if there is a drought, the price of grain and agricultural products increases if demand does not change.
The same principle of supply and demand applies to cryptocurrencies. Cryptocurrency gains value when demand exceeds supply. The demand for a cryptocurrency depends on many factors. Demand will increase depending on how useful it is to own the coins.
This means that if the cryptocurrency system works well (i.e., fast transactions and low fees), if smart contracts become more common, and if more companies start accepting cryptocurrencies, the demand for cryptocurrencies will increase. In addition, there is a greater demand for cryptocurrencies as a store of investment of value. The rise in cryptocurrency prices may have come as a pleasant surprise to cryptocurrency enthusiasts, especially after CPI-based inflation data in the United States hit a new 40-year high of 9.1%. The decline in cryptocurrency prices will depend on “whether the stock market has bottomed out and if no major cryptocurrency company goes into liquidation,” according to Edward Moya, senior market analyst at Oanda.
Just as the convenience of its products affects the price of a company's shares, the cryptocurrency system affects the cost of trading cryptocurrencies.