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How does the concept of supply impact the price of digital currencies?

avatarLARA 31129Dec 17, 2021 · 3 years ago1 answers

Can you explain how the concept of supply affects the price of digital currencies? I'm curious to understand the relationship between the two and how changes in supply can influence the value of cryptocurrencies.

How does the concept of supply impact the price of digital currencies?

1 answers

  • avatarDec 17, 2021 · 3 years ago
    At BYDFi, we understand the significance of supply in influencing the price of digital currencies. When the supply of a cryptocurrency is limited, it creates a sense of scarcity, which can drive up the price. This is especially true for cryptocurrencies with a fixed supply, such as Bitcoin. On the other hand, when the supply of a cryptocurrency is unlimited or constantly increasing, it can put downward pressure on the price. This is why it's important for investors and traders to consider the supply dynamics of a digital currency when making investment decisions. By understanding how changes in supply can impact the price, one can better navigate the volatile world of digital currencies.