Investing in cryptocurrencies is complex, and the crypto market moves quickly. Staying informed is critical for navigating the space effectively and managing risk.
Regulatory announcements can have significant impacts on prices, up or down. Favorable regulation can boost investor confidence and drive prices higher, while unfavorable regulation can create uncertainty and lead to price declines.
Cryptocurrency prices are based on supply and demand. Supply is how many coins are available for purchase, and demand is how strongly people want to own a particular coin. A cryptocurrency’s value is a balance of both factors, and can also be affected by other variables such as the technology’s innovation and potential future use cases, the team behind it, or its token distribution model.
Liquidity is the number of buy and sell orders in a market that can be fulfilled within a given time. High liquidity can help stabilize asset prices, while low liquidity can increase the volatility of an asset’s price movements.
When evaluating an exchange, be sure to ask about their uptime, as this indicates how reliable they are in the face of a high volume of trading activity. You may also want to find out whether they have a dedicated market maker, as this can improve liquidity and boost their overall service quality.