Product in the Spotlight: Monero-Bitcoin
Monero’s price tends to follow that of Bitcoin. If the latter takes on a bearish or bullish trend, expect the same from Monero. With this in mind, it becomes important to understand what drives the price of Bitcoin.
Factors That Affect Bitcoin and the Monero/Bitcoin pair (XMR/BTC)
Supply and Demand
Mining, the need to solve complex equations to gather Bitcoins, is deliberately made tough, so that the demand remains controlled. As the acceptance of Bitcoin surges, its demand rises. However, Bitcoin is a finite currency, and that ensures that the demand will always surpass supply. In this, the cryptocurrency bears close resemblance to gold, silver and crude oil, all of which are finite and highly valuable.
Regulation Enforcement by Governments
Saying no to Bitcoin seems to increase its appeal as people push to be part of a new and somewhat exciting ‘digital revolution.’ In 2017, Japan’s recognition of cryptocurrency as a legal mode of payment was one of the prime factors behind the soaring price of Bitcoin. It is a cause and effect situation, where people buy more crypto to circumvent their government’s cash controls, which in turn results in the said government putting regulations in place.
Prices are manipulated by negative and positive publicity. Any news about hacking, ICO bans and launches, celebrity endorsements gone wrong and such like can bring down its price. Similarly, good news can result in a price hike. The increase in value has also been attributed to online activity. Researchers have found a strong correlation between the price of Bitcoin and Bitcoin-related tweets, for example. When the overall sentiment is positive and a buzz is created, this can affect the price – and vice-versa.
Huge Adoption Rate
Bitcoin is increasingly being adopted as a preferred mode of payment by merchants and for money transfers and trading operations. More people are trading it than ever before, which increases its value. It is a high-demand financial trading instrument, rather a global currency, with no association with central banks or governments. It is this decentralised element which makes cryptocurrencies like Bitcoin so appealing to the masses.
The latest advancements in technology influence the price of Bitcoin. If the digital currency gets integrated into high-performing systems, or is adopted by major tech brands, its price surges. This is because such developments bring it into the spotlight and spark interest in the cryptocurrency.
Influence of the Crypto Community
Bitcoin remains the most valued cryptocurrency, despite superior altcoins having been developed. This is because there is a lot of trust within the community (users and developers). It has been around for longer than all other altcoins. As a trader, it is always wise to stay in touch with discussion forums, communities and chat rooms, to get an idea of the direction of price movement.
2018 Price Movement of Monero
Monero started 2018 at a price of US$337.93 and has been on a more or less steady path since then. By January 7, 2018, it was trading at a price of US$456. Unlike other cryptocurrencies, which took a nosedive in the following months, Monero’s price remained stable at an average of $300. As of June 1, 2018, it is trading at US$156, and experts predict that it might reach a value of $650 by 2019, with a five-year forecast of US$2,000. These predictions are based on its anonymity quotient, which upholds the principles of blockchain too.
Primary price drivers will continue to be Monero’s usability and availability. We saw how getting listed on a prominent exchange like Bithump led to a surge in its value by US$100, after it was made available to the South Korean markets. Its rapid use in money-laundering activities has made the banking sector skeptical about it. But crypto enthusiasts claim that harsh criticisms from banks and other organisations will only help it rise further.
What makes it all the more appealing is that the coin is not susceptible to regulatory pressures and taxation laws. The presence of ring signatures actually makes it difficult to even ascertain its ownership. This might make it a tax haven for investors and usable for portfolio diversification as well.
Despite short-term volatility, the future of Monero appears stable.