How Are Cryptocurrency Prices Maintained?
First of all, let’s figure out what we mean saying that prices are “maintained”. As cryptocurrencies are traded on the market, their prices constantly increase or decrease influenced by numerous factors, both internal and external.
A cryptocurrency value is reflected in its price. The more useful a coin is, the more valuable it is considered and the higher demand for it. Demand is the force that pushes the price of a specific cryptocurrency up. This is an internal factor.
Among external factors, there is a speculation pressure. Traders, who buy a cryptocurrency and intend to sell it a little more expensive, significantly impact its price regardless of its real value. Quite often, the rate goes down when traders sell huge amounts of coins. To prevent this, the cryptocurrency creators may use some techniques to compensate a negative dynamic.
For example, developers sometimes involve mass media to support their cryptocurrency. The more the talk to the audience, the better the coin’s reputation is. This means that the project is still alive. From time to time, development teams add new features to their products, so that users are confident their choice is right. Of course, such a kind of activity has a positive influence on the rates.
By cooperating with different news websites and supporting a constant flow of important and exciting information about their products, developers can do great job in rising prices up. Public support is equally important, as people tend to trust those teams that are already trusted. Another interesting fact is that volunteers can support the project by their ideas as well. This includes feedback, development tips and other relevant elements.
A solid community is a huge advantage before running an ICO. As in many other processes, it works like an avalanche. The more followers you have, the more you will attract.
Illusion of the market activity
The price growth depends on liquidity. The lack of the market activity can be artificially boosted by crypto developers - for instance, with the help of trading bots dedicated to buy and sell a required amount of tokens. As coins keep constantly circulating, their liquidity increases and pulls the capitalization up. Of course, this measure cannot be 100% efficient on its own as it does not allow generating real demand for the cryptocurrency, however, this may be a helpful tool.
Social media is another important way to support your cryptocurrency. There are always many crypto enthusiasts who are subjected to gossips and rumors just like everybody else does. So, some information leakage might be useful when choosing an investment target.
Pumping the coin is a market manipulation that means increasing the value of a coin by imitating high demand for it with the help of artificially created storage. In fact, the market participants disapprove of this technique as the most of pumped assets get sold right after their rates go up. Then the price falls because of the market saturation with demand. Nevertheless, this practice is common even for traditional markets.
There are different bots monitoring this kind of activity. For instance, CryptoPing is a bot software for the Telegram app that monitors the crypto market. It detects the attempts of pumping on the cryptocurrency market and signalize about it.