Answer: Prices on LiteBit depend on various factors.
Factors that determine the prices on LiteBit:
- Market capitalization
- Currency fluctuations
- Trade volume
- Influence by third parties (primarily cryptocurrency with small market sizes)
- Transaction costs
- Difference between supply and demand
The market capitalization of Bitcoin, for example, is the combined total value of all Bitcoins (that are currently on the market). If there are 17,000,000 Bitcoins with a value of €8,000 each, the market capitalization will be €136,000,000,000. The bigger the market capitalization, the bigger the higher the price.
Market price fluctuations
Every time cryptocurrency is traded, its price may change. This is called market price fluctuation. Because of market price fluctuation, the prices at LiteBit can differ every second.
The trade volume is the amount traded in cryptocurrency in the last period (week or day). Let’s take Bitcoin as an example. In the past 24 hours, an amount of x Bitcoin may have been purchased and sold. The combined value of these transactions (x) is the trade volume. Very big trade volumes may cause market price fluctuations, which will, in turn, cause price changes on LiteBit.
Influence by third parties
People or parties with large amounts of money can manipulate the market. If a lot of money is invested in a cryptocurrency, the value of this cryptocurrency will increase significantly. If these investors cause a price increase this way, the prices on LiteBit will also increase.
Cryptocurrency transaction costs
Transactions on the blockchain often also require a fee. A fee is a small payment. The fee may differ for each cryptocurrency.
Difference between supply and demand
The difference between supply and demand has to do with the amount the buyer is willing to offer and the amount the seller of the cryptocurrency is asking. Let´s take Bitcoin as an example. In the example below, the Bitcoin has a value of €1.
The demand side (€) offers a maximum of €0.90 for a Bitcoin. The Bitcoin owners (supply side) want a minimum of €1.10 for the Bitcoin. If both the demand and supply side persist in their price, no transaction will be made. Only if someone from the demand side does decide to purchase the Bitcoin and pays €1.10 for it, a transaction will be made.
LiteBit charges a fee of about 2% per transaction. This means that, if we use the currency from the example above and the Bitcoin has a market value (average price between purchase and sale price) of €1, the price of Bitcoin on LiteBit is determined as shown below:
The purchase price of Bitcoin:
Offering price + 2% LiteBit fee = Purchase price LiteBit
€1.10 + €0.022 = €1.12
The sales price of Bitcoin:
Asked price - 2% LiteBit fee = Sales price LiteBit
€0.90 - €0.018 = €0.88
The difference between the purchase and sales price at LiteBit in this example is 21.43%, while the difference between supply and demand is as much as 18.18%. LiteBit is only responsible for 3.25% of the difference in this example.
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