What Forces Drive Crypto Prices?

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Bitcoin (BTC) undoubtedly remains the trail-blazer for the global cryptocurrency market, with this asset having led the space since its inception back in 2009.


Despite being the most popular and lucrative crypto asset, BTC is renowned for its inherent volatility, with its price performance through the final quarter of 2020 and 2021 to date.


But how exactly has BTC fared during this time, and what factors drive crypto prices in the general marketplace?


The Recent Performance of BTC


If we cast our minds back to September 22nd, a single BTC token was worth £8,149,86


It began to embark on an incremental upward trend during Q4 of last year, more than doubling to £21,193.12 by January 1st as it broke through the £20,000 barrier for the first time since 2017 (which saw Bitcoin’s most iconic bull run prior to 2020).


Following the decision of BTC’s Elon Musk to invest $1.5 billion into BTC (we’ll touch on this a little later in the piece), the asset’s price soared to a whopping £41,089.98. This trend continued through April 14th, when the token increased to a record high of £47,240.05.


A BTC flash crash and subsequent bull run followed, however, with this being compounded by negative market sentiment and the decision of the aforementioned Musk to stop Tesla from accepting BTC payments amid concerns over the sustainability of Bitcoin mining.

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Incredibly, BTC shelved more than 50% of its value in just nine weeks, slumping to £21,869.49 while precipitating the decline of similar assets such as Ethereum. 


The volatility has continued unabated throughout Q3 of 2021, recovering to rise above £38,000 in early September before a BTC flash crash on the 20th of this month saw the asset decline by 8% in a few hours as more than $200 billion was wiped from the crypto market as a whole.


What Factors Impact Crypto Prices?


According to OANDA’s Senior Market Analyst and forex trading expert Craig Erlam, sentiment definitely plays a key role in driving BTC prices and shaping value in the wider crypto market.


This at least partially explains the volatility associated with BTC, as it lacks tangible and inherent value as an asset and is heavily influenced by how it’s perceived by investors and influencers alike.


This is why the price of BTC soared when Elon Musk invested heavily in the asset, before plummeting following his criticism of its sustainability and concerns of the energy consumption levels associated with mining the asset (and similar cryptocurrencies that use a Proof-of-Work (PoW) consensus mechanism.


While this will always cause fluctuation in the price of BTC and crypto assets, however, it’s interesting to note that Bitcoin’s value has appreciated markedly over the course of the last year. 


More specifically, it’s now valued at £34,422.18 as of September 20th and following its flash crash, which is more than four times higher when compared with 12 months ago.

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This is indicative of an increasingly resilient and in-demand asset, and one that continues to benefit from mainstream adoption and the attention of institutional investors from across the globe.