The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

The cryptocurrency market is having a hard time getting out of its current downturn, but it is not alone, as other markets around the world are also going through a tough bearish phase due to concerns about a recession and rising inflation. Cryptocurrency prices are generally determined by supply and demand factors, minting new tokens, fundamentals, exchange listings, and government regulations. It is important to know that in the current inflationary situation, as investors clearly move away from riskier assets, it is difficult for Bitcoin and the entire cryptocurrency market to regain its glory. Many investors want to know more about what determines the price of this cryptocurrency? Let the following coin circle editor analyze the logic of the rise and fall of cryptocurrency prices for everyone.

 What determines the price of cryptocurrency?

1. Supply and demand factors

Although cryptocurrencies are different from other types of assets, they are still subject to the forces of supply and demand. The general rule of thumb is that when there is a surge in demand from traders, cryptocurrency prices will rise, and an oversupply of crypto assets will cause prices to fall. In order to balance the forces of supply and demand, cryptocurrency projects use complex processes to control the circulation of tokens. Some processes are implemented during the token minting phase to regulate the creation of new tokens. For example, for each mined Bitcoin block, only a fixed number of BTC enters circulation. Using a fixed maximum supply for cryptocurrencies is another way to maintain balance, and Bitcoin will double down on introducing a halving feature to create scarcity.

2. Minting New Tokens

The creation of new tokens plays an integral role in crypto prices. Cryptocurrencies, especially those with a proof-of-work consensus mechanism, generate new tokens through mining, i.e. solving complex mathematical problems through computing power. This method of crypto mining usually requires the use of expensive mining equipment and a large supply of electricity to work. Given the high cost of the mining process, miners are only incentivized to protect the blockchain network if their efforts are fully rewarded.

3. Fundamentals

Crypto traders often approach the market by staring at charts for hours to focus on technology. However, reports and activities surrounding a specific cryptocurrency project are often decisive in determining prices. For example, reports of technological advancements or groundbreaking partnerships will appear before bullish moves. Ethereum's London hard fork and Cardano's Alonzo hard fork were bullish precursors that led to their native tokens hitting all-time highs.

4. Exchange listings

Play an important role in determining crypto asset prices. Projects listed on popular exchanges increase investor choice, leading to increased demand. A surge in demand is associated with an increase in asset prices. For crypto projects listed on small exchanges, retail and institutional investors will not have multiple options to invest in these projects. A study by Messari pointed out the phenomenon of the "Coinbase effect", in which crypto tokens have seen a significant surge in valuation after being listed on leading exchanges.

5. Government regulations

The rise and fall of cryptocurrency prices can be related to the actions of government agencies and legislatures. A law that gives cryptocurrency legal status can push prices to new highs, while a crackdown on cryptocurrency activities can cause prices to fall. China's infamous crackdown on cryptocurrency activities in 2021 almost pushed the ecosystem into a crypto winter, and the SEC's protracted lawsuit with Ripple
Labs had an adverse impact on the price of XRP.

 Analysis of the logic of cryptocurrency price rise and fall

1. Digital currency supply:

For example, Bitcoin may have a limited supply (21 million) and is expected to be fully mined by 2040, but even so, currency availability will fluctuate depending on how quickly it enters the market and the activities of holders.

2. Cryptocurrency market value:

The value of the cryptocurrencies market and the expectations of their value will affect the behavior of traders, who will choose to participate in a blowout or short the bubble.

3. Negative reports:

Any currency will be affected by public perception, especially cryptocurrencies. Even in its heyday, its security, value and currency circulation have been questioned.

4. Resource integration:

Establishing the image of cryptocurrencies and building confidence in defeating traditional currencies depends on their integration with new payment systems and crowdfunding platforms.

5. Industry acceptance:

Bitcoin and other cryptocurrencies have not yet been widely accepted by global companies, and the impact of placing them in a more important position in the company is still unknown.

6. Key events:

Any major event, including regulatory changes, security vulnerabilities, and macroeconomic setbacks, may have a serious impact on cryptocurrencies.

I hope that through the above analysis of the logic of cryptocurrency price fluctuations, everyone can quickly understand what determines the price of this cryptocurrency. Bitcoin is not the only cryptocurrency experiencing a price drop today. In fact, the entire cryptocurrency world is under extreme fear and great pressure due to the Fed’s policy of tightening monetary policy and raising interest rates, which has led to a drop in the prices of many other cryptocurrencies, including Ethereum, XRP, Cardano, and many others. In fact, the same Fed policy also affects major stock exchanges around the world. As an investor, you should avoid panic selling or panic buying, as they tend to deteriorate your portfolio.