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Curious About Cryptocurrency Valuations? Here's Your Answer

Curious About Cryptocurrency Valuations? Here's Your Answer

For those just starting to trade cryptocurrency, one of the first questions that usually arises involves coin and token values. Given that it's normal to see the price of a Bitcoin rise or fall by hundreds of dollars in one day, it's natural to wonder why these fluctuations are occurring.

With that in mind, let's take a closer look at the factors that influence the prices of popular digital currencies such as Bitcoin, Ether, XRP, Bitcoin Cash, Litecoin, Dash and Ethereum Classic.

By illuminating these issues, we hope this paper will give investors a basic knowledge framework to begin evaluating the opportunities offered by this innovative and exciting new asset class.

Cryptocurrency Valuations 101

If you're new to digital assets, you've probably wondered about the price disparities between different coins. Why is Bitcoin valued at US$6,500, for example, while Litecoin is valued at US$65?

The truth is that these prices are derived from a multitude of different factors, including the following:

Ultimately, traders should consider all of these factors when looking at cryptocurrency valuations.

Some traders also employ a trading technique called technical analysis. When using technical analysis, traders examine statistical trends derived from historical price data, volume and chart patterns, then use this information to identify buying opportunities. Bitvo provides a form of this Technical Analysis for all of the cryptocurrencies it supports, when logged in to your Bitvo account.

The Takeaway

The value of Bitcoin and other popular cryptocurrencies is influenced by a variety of factors, including supply and demand, fundamentals and market sentiment. By familiarizing yourself with how this process works, you can learn to make more accurate assessments of a digital currency's value.

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