Ever since cryptocurrencies’ inception, digital assets have become the talk in the global market. Many have engaged in cryptocurrency mining and turned it to be a full-time business. Nonetheless, as the business is rife and proactive globally, there are some basic factors that influence the cryptocurrency market this year. So, if you’ve set yourself to start a cryptocurrency business in Dubai, you must acquaint yourself with the tenets that influence the crypto marketplace.
Cryptocurrency business setup in Dubai is one thing every investor is longing to start. However, to snowball your business, you must understand what influences the cryptocurrency marketplace in Dubai.
And, so, the cryptocurrency marketplace is primarily influenced by the cryptocurrency competition in the marketplace, supply of crypto and the demand for it, government regulation, and the cost of production.
Therefore in this article, you’re going to learn some of the fundamental aspects that normally influence the cryptocurrency marketplace, especially in Dubai. This will give you a clear blueprint on when and what time to invest in crypto mining as a crypto investor.
Similarly, you’ll be ahead of your rivals and understand better the crypto marketplace. While walking you through the major factors affecting the crypto marketplace, you’ll familiarize yourself with what makes cryptocurrency rise and fall or go up and down. Additionally, we’ve narrowed down the basic concept of how cryptocurrency gains value in the marketplace.
Without further ado, let’s dive in;
What Makes Cryptocurrency Rise and Fall?
You may be wondering, what makes crypto rise and fall? It is quite peculiar to witness a rise or fall of 4% or even 11% of crypto every single day. But this can happen, right?
Usually, the value of a product is normally determined by its supply and demand. That means; if a product has got a high demand on the marketplace. It is needless to say, the supply of the product will expedite exponentially.
For instance, if there is famine in the country, the price and value of cereals or grains will increase if at all the demand is not altered in any way. However, if the drought hits the land and the demand for the product also dwindles. Then, the supply of the product will be affected tremendously. This is also the case with crypto. When the demand decreases, the supply also comes down.
So, the supply of crypto is somehow detectable. Another crypto such as Bitcoin has a fixed maximum supply as opposed to others such as Ether, which has no cap on supply. Therefore, in most cases, the demand for cryptocurrency increases when the crypto is widely known or has gained huge awareness globally.
Ultimately, the supply of crypto and the demand for it will lead to its rise and fall. Conversely, how does cryptocurrency gain value in the marketplace? Let’s find out;
How does Cryptocurrency Gain Value in the Marketplace?
Generally, the best place where crypto can gain value is on the exchange platforms. And, so, its value will increase if the demand and supply of it are high. Just like other products in the marketplace, the demand and supply of the products profoundly determine its pricing, so to cryptocurrency.
Thus, the supply of crypto will largely depend on the number of new coins being mined and how many owners want to trade it at that time of release. In fact, the demand for crypto will solely depend on how useful the coin is to the users. If it lacks usability at that time, then its demand will go down.
That’s said; it gives us a door to discuss the main factors that influence the cryptocurrency market in Dubai.
Factors influencing Cryptocurrency Market in Dubai
To mention, cryptocurrency is not backed up by the government or any central bank. Therefore there are some factors such as the inflation rates or the monetary policies that don’t apply to crypto.
Bitcoin or rather a cryptocurrency are hugely influenced by the following factors;
The competition serves to be the big factor influencing the crypto marketplace in Dubai. When launching a product, there must be a stiff competition going on in the marketplace. Crypto marketplace is not exceptional.
Therefore, even though Bitcoin is the most widely known crypto in the world, there are hundreds of other tokens competing for crypto investment dollars. Even though Bitcoin has surpassed others in the cryptocurrency marketplace, there are other currencies in the market that have started to gain a reputation.
As such Ethereum has become the biggest competitor of Bitcoin because of its decentralized finance. Therefore, investors who are seeing potential in Ether are deviating from Bitcoin. Generally, you must be aware of the stiff and rife competition affecting the crypto marketplace.
2. The Cost of Production
Similar to other products, the cost of production plays a monumental role in determining the price of crypto in the market. Thus, the price of Bitcoin closely correlates with its marginal cost of production. That means; the cost of a product for Bitcoin might include the total sum cost of electricity used in mining Bitcoin, infrastructure, and other indirect costs.
So, when the cost of production of a product is exceedingly high, the outputs might also be affected. And this goes to the cost of products used in crypto. Hence, the cost of electricity used to mine Bitcoin might be costly and alter its production.
3. Supply of Crypto and the Demand for it
The supply and demand of a product is another pertinent factor that plays a role in influencing the cryptocurrency marketplace in Dubai. Thus, the supply of a product will affect the price of it in a fraternity. That means; if the product is difficult or scarce in the marketplace, then, its price will always go up and vice versa is true.
Therefore, the policies governing crypto permits Bitcoins to be created at a fixed rate. This rate is determined to slow down as time goes by. For instance 2016 the rate was 6.9%, followed by 4.4% in 2017, and in 2018 the rate reduced to 4%. On the other hand, the demand for crypto might shift due to the geographical and economic considerations of a certain country.
Be it that there are other hundreds of cryptocurrencies in the marketplace, Bitcoin has remained to be the mother of all. Meaning, there are several factors that couple up to determine its presence in the marketplace, unlike other currencies. However, the major factors that influence cryptocurrency include regulatory developments, supply of crypto and the demand for it, production costs, competition, and more.
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