CHAPTER 10

What Drives Crypto Prices?

Adoption, liquidity and sentiment

Opening question

“Why can bitcoin lose half its value in a few months?”

In this chapter

Why a crypto price is set by demand and supply with no cash-flow anchor
Bitcoin's fixed supply schedule and what halvings really change
Supply rules of other tokens: issuance, burning, staking and unlocks
Adoption, network effects and what on-chain data can and cannot tell you
How global liquidity, interest rates and the dollar move crypto markets
Leverage and liquidation cascades, with a worked example
Narratives, social media and the cycle of fear and greed
Why valuation is hard, and the main approaches investors use

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This chapter is in the full book

Chapter 1 is free to read online. The full text of chapter 10 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Forex and Crypto Investing: From Theory to Practice (Volume 3, NXW Investment Library).

Read Chapter 1 free Get the full book — [email protected]

Sections of this chapter

10.1 A price without an anchor

10.2 Supply: bitcoin's fixed schedule

10.3 Supply rules of other tokens

10.4 Adoption and network effects

10.5 On-chain data: reading the ledger

10.6 Liquidity, interest rates and the dollar

10.7 Leverage and liquidation cascades

10.8 Sentiment, narratives and the cycle of fear and greed

10.9 Why valuation is so hard

10.10 Crypto prices seen from Vietnam and Asia

← Chapter 9: Central Banks, Capital Flows and Currency Crises Chapter 11: Risk, Volatility and Correlation in FX and Crypto →