What causes cryptocurrency to rise and fall?
Jul 15, 2025・5 min read
If there’s one thing crypto traders can count on, it’s volatility. From Bitcoin (BTC) and Ethereum (ETH) to smaller altcoins, crypto prices often swing wildly – sometimes with obvious causes, sometimes with none at all.
That unpredictability is part of what makes the digital assets market exciting – and risky. Whether you’re investing for the long term or just watching from the sidelines, learning what affects crypto value can help you make more confident, informed trading decisions.
In this guide, we’ll explain the basics of what causes cryptocurrency to rise and fall and what investors can do to minimize risk and maximize rewards.
What makes crypto “go up”?
So, how do cryptocurrencies gain value? It often comes down to factors like market sentiment, adoption trends, and other fundamental developments. Strong use cases, active development teams, notable partnerships and integrations, and growing community support are all things that attract the attention of investors.
One strategy traders often use to spot promising projects early is to monitor on-chain metrics, like transaction volume or wallet activity. It can help identify rising interest before the broader market catches on. Social media buzz and developer activity on platforms like GitHub can also hint at potential growth.
Still, even with the best analysis, crypto markets are notoriously unpredictable. Strong technical and fundamental factors sometimes take a backseat when sudden events occur, like major news stories or significant regulatory changes. For example, China’s crackdown on digital assets in September 2021, which included a ban on crypto mining, sent Bitcoin (BTC) tumbling about 30% within weeks. By contrast, when the United States announced plans for a Strategic Bitcoin Reserve in March 2025, it pushed BTC prices from around $80,000 to over $95,000 almost overnight.
Ultimately, investing in any digital asset involves risk. But you can help avoid losses by analyzing a project’s use case, developer activity, and on-chain metrics, staying informed about market trends and news, and never investing more than you can afford to lose.
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What drives the price of cryptocurrency? 6 factors to consider
No crystal ball can predict crypto’s next big winner. But by paying attention to a few key indicators, it’s easier to recognize which projects are worth keeping an eye on.
1. Supply and demand dynamics
The most fundamental driver behind the price of any asset, including cryptocurrency, is supply and demand. When demand is higher than supply, prices rise. When supply exceeds demand, prices fall.
While there’s no way to exactly pinpoint how Bitcoin’s price is determined, its capped supply of 21 million is a key factor. Adoption trends, positive news, and speculative interest can all drive demand, while things like mining rates, tokenomics, and the number of coins held by active participants affect supply.
2. Macroeconomic conditions
Compared to traditional financial markets, digital currencies are a small island in the middle of a vast ocean. In other words, global economic trends can greatly impact crypto prices. Inflation, interest rates, and economic stability all influence investor sentiment toward riskier assets like cryptocurrencies.
For example, when inflation is high, some investors may turn to Bitcoin (BTC) as a hedge against fiat currency devaluation, which increases demand and prices. Conversely, rising interest rates can make traditional investments more attractive, potentially drawing capital away from Bitcoin (BTC) and the broader crypto market.
3. Regulatory landscape
Regulation has been a wildcard in the crypto game, and it can also have a major impact on prices. Clear, favorable policy changes often spark bullish trends, while restrictive moves tend to trigger fear, uncertainty, and mass sell-offs. A well-defined regulatory framework is especially important for attracting institutional investors, as fund managers must strictly adhere to specific financial laws and regulations when investing their clients' money.
4. Price manipulation
Crypto’s lawless early days earned it the “Wild West” label for a reason, and while regulators have set some guardrails, much of the market remains unregulated. That leaves the door open for price manipulation. Pump-and-dump schemes – where bad actors artificially inflate a coin’s value before selling – and rug pulls, where project developers sell off their tokens and abandon the project, are still common. Wash trading also persists, where traders buy and sell the same asset to create artificial trading volume and mislead other investors.
Add to that the presence of whales (large holders who control a significant share of a token’s supply), and it’s easy to see how a few players can sway prices as they wish. While manipulation is harder to quantify, it’s a fundamental factor in crypto’s volatility.
5. Technological innovations
Nobody knows exactly what makes crypto go up, but technological progress is often a big part of the story. Projects that offer real-world utility or solve meaningful problems tend to attract investor interest—and that demand can push token prices higher.
One reason digital assets continue to gain momentum is the pace of innovation. When a project introduces something new or moves the ecosystem forward, the market usually notices and responds positively.
6. Speculative trading
Speculation remains one of the primary drivers of cryptocurrency prices. Hype circles, which are often fueled by social media platforms like X or influencer endorsements, can send prices soaring as fear of missing out (FOMO) kicks in. On the flip side is fear, uncertainty, and doubt (FUD), which can spread just as quickly, triggering panic selling and steep price drops.
Because emotion often outweighs logic in fast-moving markets, speculation tends to overshadow fundamentals – making it one of the most unpredictable (and risky) forces in crypto.
Can cryptocurrencies be overbought or oversold?
Yes. Just traditional assets, crypto can swing too far in either direction. Fortunately, technical indicators can help identify when overbuying or overselling is likely. Three of the most commonly used tools for spotting such conditions are the Relative Strength Index (RSI), Stochastic Oscillator, and Bollinger Bands.
- Relative Strength Index (RSI): RSI is a momentum oscillator that ranges from zero to 100. A reading above 70 typically indicates that a cryptocurrency is overbought and could experience a price correction. Conversely, anything below 30 suggests oversold conditions, which may precede a rebound.
- Stochastic Oscillator: This indicator compares a specific closing price to the asset’s recent trading range, also on a scale of zero to 100. Readings above 80 may mean the asset is overbought, while readings below 20 suggest it’s been oversold.
- Bollinger Bands: These charts consist of three bands: a middle band that shows a simple moving average and two outer bands that reflect standard deviations above and below it. If prices move near or beyond the upper band, the asset may be overbought. If they touch or fall below the lower band, it may be oversold.
What to consider when using market indicators
While these indicators can provide valuable insights, they’re not foolproof. They should always be used alongside other tools, like on-chain data and market news, and smart risk management is always a must. Remember, no matter how strong an indicator seems, overbought or oversold conditions don’t guarantee a reversal.
Manage crypto volatility with CoinTracker
Anticipating whether crypto prices will rise or fall involves analyzing several factors, from supply and demand and market sentiment to innovation and speculation. Tools like RSI and Bollinger Bands can help flag certain conditions, but no single metric captures the complete picture of crypto’s volatility. That’s why it’s important to stay informed, think critically, and manage risk carefully.
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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.