Cryptocurrencies are digital representations of value or rights secured by encryption and typically use some type of distributed ledger technology (DLT). They promise to make transferring money between two parties more efficient by bypassing a third party such as a bank. However, their value fluctuates and is volatile.
Unlike traditional financial markets, which have been around for centuries, the crypto market is relatively new and is still evolving. But that doesn’t mean the risks are any less. In fact, the volatility of cryptocurrencies is one of their most distinctive features, with prices often rising or falling rapidly.
For token issuers, ensuring that the liquidity of their market is high is crucial. It can help them achieve scalable growth and credibility, as well as avoid deceptive tactics. This is why it’s important for them to work with market makers that focus on organic volume growth over manipulation.
In the crypto market, a coin’s price and circulating supply are the main factors that determine its value. It’s easy to calculate the total market capitalization of a cryptocurrency by multiplying the former and latter. For example, if a coin is priced at $100 and has 25 million coins in circulation, its total market cap would be $25 billion. This figure is also an essential indicator for investors when deciding whether to invest in a particular coin or token. However, the value of a currency can also be affected by factors such as energy costs (to mine the coins), regulation and supply and demand.