Cryptocurrency exchange rates

Getting acquainted with cryptocurrency exchange rates is beneficial for anyone investing money in the digital currency. As an investor, cryptocurrency exchange rates are an important pointer to take into account when buying and selling, for example, Bitcoin.

Cryptocurrency exchange rates are generally characterized by great dynamics and a lot of fluctuations. This is because the cryptocurrency is volatile compared to, for example, commodities such as platinum, silver and gold.

Anyone considering buying cryptocurrency should consider following the market and prices. Here we will explain to you in more detail what cryptocurrency exchange rates are, and what factors influence the exchange rate.

This knowledge can be used whether you are trading Bitcoin, Litecoin, Ethereum, Ripple or other cryptocurrencies.

What are cryptocurrency rates?

Cryptocurrency exchange rates can be described as the value of the currency you buy, expressed according to the price of the currency you buy with (for example Norwegian kroner (NOK). An exchange rate thus describes the value of one currency, measured by a completely different type of currency.

If you see cryptocurrency exchange rates of NOK 100, this means that you must pay NOK 100 to buy one currency unit of the currency in question.

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How are cryptocurrency rates calculated?

Cryptocurrency exchange rates are calculated by dividing the currency’s current market value by the number of units of the currency available. This is the market value used as a starting point when assessing whether one type of cryptocurrency is cheaper than another.

Let’s take an example. Imagine that there is a specific type of cryptocurrency that has a market value of 50,000,000,000 NOK and there are 10,000,000 units. Then you find the cryptocurrency exchange rate by dividing the market value by the number of units:

50,000,000,000 NOK / 10,000,000 units = 5,000 NOK / unit

Imagine another case, where the cryptocurrency may have a market value of only half (25,000,000,000 NOK) and there are only 2,500,000 units available. The cryptocurrency exchange rate will then be as much as 10,000 NOK / unit.

Higher price can mean cheaper cryptocurrency

As you can see from the examples above, a seemingly “expensive” cryptocurrency price may be cheaper than another cryptocurrency. Although the market value of one was only 50% of the other, the price was twice as high.

Therefore, the price of a specific type of cryptocurrency will not tell you whether it is expensive or not. This is the market value you should look at. Cryptocurrency exchange rates are thus completely dependent on supply and demand.

What governs cryptocurrency exchange rates?

There are a number of factors that affect cryptocurrency rates. The most important are supply and demand. When a cryptocurrency is popular and many people buy it, the value will increase. Otherwise – with declining popularity – the value will decline.

Supply and demand are affected by trends, popularity, restrictions and other factors. The size of the supply of cryptocurrency can also be affected by transaction costs, circulation quantity, hash rate, mining and the like.

Let’s take a closer look at some of the key factors.

Supply and demand

Like most other goods and services, cryptocurrency exchange rates are affected by supply and demand. With high demand and a small selection, the price will naturally skyrocket.

What is a bit interesting about the exact cryptocurrency is that the amount of cryptocurrency that is available is determined in advance. For example, it has been determined that there are 21,000,000 units of Bitcoin .

Since cryptocurrency only exists in limited circulation, future increases in demand may lead to demand being far higher than supply. This can have a significant impact on cryptocurrency rates and prices.

Financial crises

Cryptocurrency rates can also be affected by financial crises. If a country’s economy is exposed to hyperinflation or the like, the population may lose confidence in the traditional currency.

The money you have in the savings bank can potentially have a negative interest rate – which means that you have to pay the bank to have the money there.

With cryptocurrency, inflation is very low compared to traditional currency. In a financial crisis, there is therefore an increased probability that many people choose to invest in cryptocurrency. This could mean increased cryptocurrency exchange rates.

Cryptocurrency mining

So-called miners (or “miners”) are people who use special software and hardware to acquire cryptocurrency. The more miners there are, the more challenging the process of mining or mining becomes.

This will give a higher price for mining, and thus also the cryptocurrency. So-called miners are usually rewarded for digging up blocks of data (confirming them), often through a reward program.

Trends in news media and social media

The media and influencers are also important in terms of cryptocurrency exchange rates. The media is often referred to as the fourth state power, and can quickly contribute to influencing large numbers of people in a short time.

If the media mentions cryptocurrency as something that is smart to invest in, there is little doubt that many more will trade cryptocurrency overnight. The same goes for influencers on social media and blogs.

Legal impact of cryptocurrency exchange rates

Local governments in a country can actually have an impact on cryptocurrency rates. Changing laws and regulations is an example of this. A specific example we can refer to is when the Chinese government introduced a ban on cryptocurrency mining.

Since China is a country with a very high population, this meant that many who engaged in mining had to stop. The cryptocurrency market therefore changed abruptly, and the recovery rate of Bitcoin and other cryptocurrencies fell dramatically.

We are talking here about a frequency drop of many tens of percentage points.

FAQ

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