Where to find cryptocurrency exchange rates and how to analyze them?
Cryptocurrency exchanges
It is quite difficult to determine the most appropriate time for buying or selling a cryptocurrency. Of course, it would be very convenient to just look at the exact rate for today, as we used to do, exchanging dollars for euro or pounds. But a daily rate of a bitcoin and other digital currencies is not defined by the Federal Reserve System, the World Bank or the government. It is formed on specialized exchanges under the influence of supply and demand in real time and it is constantly changing.
Like any similar asset like shares, gold or oil. Each exchange has its own bid and ask quotations, so there are no uniform rates of cryptocurrencies at a given time all over the world. But there are no big price differences among exchanges.
Note: It’s recommended to trade on high cash flow exchanges. They provide less spread because there are more buy and sell orders.
What determines a cryptocurrency price?
The bitcoin rate like any other currency, cryptocurrency or securities, grows only if the demand goes up. If traders are ready to buy, then its rate will gradually increase. And vice versa, if there are no buyers, sellers have to reduce prices. However, in view of relatively low overall capitalization of the cryptocurrency market, it is heavily influenced by mass panic and major players, which is really noticeable on online graphs of digital currency rates.
In fact, any holder of a one million dollar account can collapse or raise the market taking advantage of overall confusion and agiotage. There are not only buy-and-hold investors. Transactions with cryptocurrency can be compared to the oil market. The majority buy oil not because they need it but to wait for the price increase and sell at a profit.
Deflationary model as a problem
To be able to analyze the cryptocurrency market in the long term, one must bear in mind its deflationary nature. The bitcoin and others have a clearly defined volume of money which is decreasing over time. At the same time the market is growing, which means that the volume of trade is growing and the need for currency is obviously growing too. This limited emission does not satisfy the market demand for currency. As a consequence, the value of currency keeps growing. so deflation is observed.
The main problem of the economy based on a deflationary currency is stagnation. The constantly growing exchange rate encourages people not to spend money but to save it. By the way, the ability to profit from simple savings relieves people from the need to produce goods and services. The result is a severe crisis of the entire economy because society cannot live in prosperity when no one does anything.
Perhaps the most important thing that affects the value of cryptocurrency is mass interest. The more people trust the currency the higher is its price. For this reason official statements of the Central Bank or the Ministry of Finance about cryptocurrency are very important. If the world's largest economies give a green light to the use of digital currencies, it will lead to their sharp growth.