Exchange rates for fiat currencies are elementary determinants of a country’s economic state, including interest rates and inflation rates. That is why they are meticulously analyzed and, in many cases, controlled by governments for economic reasons. The same is true of cryptocurrency value converters. Nevertheless, in their case, everything comes down to the micro scale – the mundane verification of whether the current exchange rate will bring the investor (not the state) a real profit.
Users most often buy or sell digital currencies in two places: online exchanges and fixed exchange offices. Today we will take a look at the latter and verify how they determine the prevailing rates of cryptocurrencies.
Cryptocurrency rates and investment
The value of a cryptocurrency, like any investment asset, is characterized by a variable market rate. It serves to determine the amount that must be paid to become the owner of a given digital currency. The largest of these, bitcoin, is currently worth (as of 14/09/2022) just over $20,000 US – we include the exchange commission for making the transaction. A person who buys not the whole bitcoin, but only a fraction of it, also depends on the applicable conversion rate. This is because investing is based on the general exchange rate applied to a particular cryptocurrency. For example, if an investor wants to purchase ⅓ of a bitcoin, at this point it will cost him about 6,666 thousand U.S. dollars. Thus, the exchange rates of cryptocurrencies are the prices of digital coins converted into dollars, euros or any fiat currency.
Current cryptocurrency rates and market rates
There seems to be a recurring trend when analyzing bitcoin’s historical exchange rates, which indicates its unpredictable nature and significant price fluctuations. To illustrate the situation: bitcoin was worth nearly $20,000 at the end of 2017. Who would have thought that in the same year it would lose more than two-thirds of that value. By 2019, the price of one bitcoin was $40,000.
The main conclusion? Trying to analyze the price of bitcoin in such a volatile market borders on the impossible. This is why many investors like to trade cryptocurrencies, where the thrill of making the right prediction is accompanied by huge potential profits.
Is there a way to measure the movement of cryptocurrencies?
According to market analysts, there are techniques that can predict the direction and timeframe in which a given change in the exchange rate will occur. They are mainly based on an in-depth reading of the rate chart associated with a given cryptocurrency. After all, the whole concept of investing is based on repetitiveness. Therefore, looking at the success of bitcoin in 2017 and despite the current market situation, one would think that another huge increase in value could be on the horizon. If this is true, bitcoin’s current rate seems minimal compared to how high it could be by the end of the year.
Nevertheless, it should be noted that every exchange rate chart has its drawbacks. First, these charts lack a three-dimensional factor that takes into account other events affecting the industry. For example, looking at previous price changes will not inform you of one of the many regulations being passed in the world of crypto assets. The same is true of the number of competitors and new technologies that worry the sector on a daily basis that are not reflected in previous price movements. Comprehensive research that combines data from different sectors is still the best way to avoid losing money in the long run.