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I would like to know if there is anything that moves the crypto market apart from the speculators, or are cryptocurrencies purely speculative?

For example, in the oil industry there are hedgers who play a large role in what happens to commodity prices.

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    Buyers and sellers move the price of a security. It doesn't matter if they are speculators, hedgers or investors. Commented Feb 13, 2020 at 15:54
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    Probably speculators, criminals, and enthusiasts. I'm sure the latter two categories are minorities. Commented Feb 13, 2020 at 16:06
  • All currencies are volatile. Most people don't see the volatility, though, because all of their transactions are in the local currency and they rarely have to exchange currencies.
    – Daniel
    Commented Mar 3, 2020 at 3:28
  • @Daniel People see this volatility if they buy goods which stem from other currency regions.
    – glglgl
    Commented Jul 22, 2021 at 7:18

2 Answers 2

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Cryptocurrency miners are likely to hedge production. Bitcoin can be hedged with futures and options. Other hedges would require a business contract with an exchange or with an investment bank.

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For all intents and purposes, cryptocurrencies are purely speculative because they have no fundamentals to drive demand or influence prices. It's worth contrasting this situation with other investments, which do have fundamentals:

  • Bonds pay periodic interest and repay their principal on maturity. The expectation of these future payments sets demand for the bonds. Prices can be influenced by changes in interest rates or changes in the creditworthiness of the borrower.

  • Stocks represent ownership stakes in companies that (hopefully) make profits that will eventually be either paid out as dividends or reinvested to make the company more valuable. Expectations about these earnings drive demand, and prices can be influenced by changes in earnings projections.

  • Commodity futures represents contracts to buy or deliver commodities such as oil or agricultural products. These commodities are used by firms to produce products and services (e.g., airlines buy large quantities of jet fuel, an oil product). Prices can be influenced by these companies forecasts of demand for their products (e.g., forecasts of passenger volumes) or by commodity producers' forecasts of their ability to meet demand.

  • National currencies are used to buy things in their respective countries, notably including exported goods and services. Thus, their prices can be influenced by global trade balances.

Of course, all of these markets have their share of speculative demand, and often speculators provide an important source of liquidity in the market. However, in all of these cases there are fundamentals that set the basic parameters for the market.

Cryptocurrencies have no comparable fundamentals. In theory, it's possible that use of cryptocurrencies as currency could expand to the point where it provides a fundamental source of demand, similar to that for national currencies in foreign exchange markets, but for the time being that usage is negligible. Thus, in practical terms the demand for cryptocurrency is entirely speculative.

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