Cryptocurrencies are the latest “ big thing '' & # 39; & # 39; in the digital world and are now recognized as part of the monetary system. In fact, hobbyists have called it a "silver revolution".
In clear terms, cryptocurrencies are decentralized digital assets that can be traded between users without the need for a central authority, the majority of which is created via special calculation techniques called “ extraction '' & # 39 ;.
The acceptance of currencies, such as the US dollar, the Great Pound Sterling and the Euro, as legal tender because they have been issued by a central bank; However, digital currencies, such as cryptocurrencies, are not dependent on public confidence in the issuer. As such, several factors determine its value.
Factors That Determine The Value Of Cryptocurrencies
Principles of a free market economy (mainly supply and demand)
Supply and demand are a major determinant of the value of anything of value, including cryptocurrencies. Indeed, if more people are ready to buy a cryptocurrency and more are ready to sell, the price of that particular cryptocurrency will increase, and vice versa.
Mass adoption of any cryptocurrency can drive up its price on the moon. This is due to the fact that many cryptocurrencies have their supply capped at a particular limit and, according to economic principles, an increase in demand without a corresponding increase in supply will lead to an increase in prices for this particular product.
Several cryptocurrencies have invested more resources to ensure their mass adoption, some focusing on the applicability of their cryptocurrencies to urgent personal life issues, as well as to crucial everyday cases, in the goal of making them essential in everyday life.
If a fiat currency, like the USD or GBP, swells, its price increases and its purchasing power decreases. This will then lead to an increase in cryptocurrencies (let's use Bitcoin as an example) compared to this fiat. The result is that you will be able to acquire more of this fiat with each bitcoin. In fact, this has been one of the main reasons for the rise in Bitcoin prices.
History of scams and cyberattacks
Scams and hacks are also key factors affecting the value of cryptocurrencies, as they are known to cause wild swings in valuations. In some cases, the team that supports a cryptocurrency may be the scammers; they will pump the price of cryptocurrency to attract unsuspecting individuals and when their hard earned money is invested, the price is shortened by scammers, who then disappear without a trace.
It is therefore imperative to watch out for cryptocurrency scams before you invest your money.
Some other factors to consider, which have an impact on the value of cryptocurrencies, include:
How the cryptocurrency is stored, as well as its usefulness, security, ease of acquisition, and cross-border acceptability
Community strength to support cryptocurrency (this includes funding, innovation and loyalty of its members)
Low associated cryptocurrency risks as perceived by investors and users
Sense of topicality
Market liquidity and volatility of cryptocurrency
National regulations (this includes banning cryptocurrencies and ICOs in China and accepting it as legal tender in Japan)