What factors contribute to the inelasticity of certain cryptocurrencies?

3 answers

• Mar 19, 2022 · 3 years ago
  One of the main factors that contribute to the inelasticity of certain cryptocurrencies is their limited supply. Cryptocurrencies like Bitcoin have a predetermined maximum supply, which means that no more coins can be created beyond this limit. This scarcity creates a sense of value and makes the price less responsive to changes in demand. Additionally, the lack of a central authority controlling the supply of cryptocurrencies also contributes to their inelasticity, as there is no entity that can adjust the supply to meet changes in demand. This makes cryptocurrencies more similar to commodities like gold, where the supply is fixed and not easily adjustable.
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• Mar 19, 2022 · 3 years ago
  Another factor that contributes to the inelasticity of certain cryptocurrencies is the presence of large holders, often referred to as whales. These whales hold a significant amount of a particular cryptocurrency and have the ability to influence its price. When whales buy or sell large amounts of a cryptocurrency, it can cause significant price movements. However, due to their large holdings, these whales may not be as affected by changes in supply and demand as smaller investors, which can contribute to the inelasticity of the cryptocurrency's price.
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• Mar 19, 2022 · 3 years ago
  At BYDFi, we believe that the inelasticity of certain cryptocurrencies is also influenced by market sentiment and investor psychology. When investors perceive a cryptocurrency as a store of value or a safe haven asset, they may be less likely to sell even in the face of changing market conditions. This can contribute to the inelasticity of the cryptocurrency's price. Additionally, the lack of widespread adoption and use cases for certain cryptocurrencies can also contribute to their inelasticity, as there may be limited demand for these coins beyond speculative trading.
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