The influence of the supply chain on the prices of cryptocurrencies
The increase in the Crypto currency such as Bitcoin and Ethereum has encouraged the decentralized nature of digital transactions. However, one key factor that has often passed is unnoticed by the influence of the supply chain on cryptocurrency prices. In this article, we will investigate that the complexity of the supply chain can affect the value of the cryptocurrency of the currency.
What is the supply chain?
The supply chain refers to the overall process of production, transport and sale of goods or services from raw materials to the end of consumer. In the context of the mining of cryptocurrencies, the supply chain involves the production of new units (hashes) by complex mathematical calculations using powerful computers called “minerals”. The goal is to solve a series of cryptographic serious mathematical problems in exchange for newly minted cryptocurrencies.
The influence of the supply chain on the prices of cryptocurrencies
Although many investors and enthusiasts believe that the prices of cryptocurrencies are largely determined by market feelings, the supply chain has a significant impact on its value. Here are some key factors that contribute to the influence of supply chains:
- Miners’ activity : number of mining devices actively participating in the network affects the total hash rate (ie the speed at which new units can be produced). Rudar’s activities, especially from China and other countries with a large population, can lead to increased demand for crypto currency, increasing prices.
- Block Time : Time required to process a block transaction is crucial for the establishment of the safety and decentralization of the network. If miners consistently slow down the procedure, it may indicate a lack of confidence in blockchain, which can affect prices.
3 This reduction of the user activity is associated with a decrease in cryptocurrency prices.
- Liquidity and volatility : Liberation level on the market (ie, customer and seller’s availability) and volatility of transactions can significantly affect prices movement. Lack of liquidity or extreme volatility can lead to rapid prices changes, which affects the demand of the supply chain for a cryptic currency.
Examples of Movement Price of Supply Chain
- 2018: Bitcoin -O’s price increase : After an unexpected change in the Chinese Government Government Regulations on Crypto Mining, Bitcoin price increased by over 50% in one week.
- 2019: Increasing the Ethereum Block Time
: Increasing a block time from 15 seconds to 14 seconds has led to a significant reduction in transactions speed, which influenced the demand of the supply and price chain.
- 2020: Ripple price of the price : slowing down the firing price (XRP) after starting its stabiblecoin, USDC, due to increased competition of other cryptic currency such as Bitcoin and Ethereum.
Conclusion
The impact of supply chains on cryptocurrency prices cannot be overstated. Blockchain network complexity can lead to fluctuation of demand and offers, ultimately affect prices. In order to alleviate these risks, investors and traders should consider the diversification of their portfolio and accepting a long -term approach when investing in the cryptocurrent currency.
As the space continues to develop, it is important that the market participants are informed of the latest achievements and adapt their strategies accordingly. Recognizing the influence of supply chains on cryptocurrency prices, we can better move in this landscape that quickly changes and make more information on investment decisions.