Cryptocururrency is the latest & # 39; big thing & # 39; in the digital world and has now been recognized as part of the monetary system. In fact, enthusiasts have tagged it as & # 39; the revolution of money & # 39 ;.
Under clear terms, cryptocurrencies are decentralized digital assets that can be exchanged between users without the need for a central authority, the majority of which are created through special computational techniques called & # 39; mining & # 39 ;.
Acceptance of currencies such as the US dollar, the Great British Pound and the euro as legal tender is because they are issued by a central bank; digital currencies, such as cryptocurrencies, do not depend on public trust in the issuer. As such, several factors determine its value.
Factors that determine the value of cryptocurrencies
Principles of free market economy (mainly supply and demand)
Supply and demand are an important determinant of the value of any of the value, including cryptocurrencies. This is because if more people are willing to buy a cryptocurrency and others are willing to sell, the price of that particular cryptocurrency will rise, and vice versa.
Mass adoption of any cryptocurrency can shoot its price to the moon. This is because many cryptocurrencies have their supply limited to a certain limit, and according to economic principles, an increase in demand without a corresponding increase in supply will lead to a price increase for the particular commodity.
Several cryptocurrencies have invested more resources to secure their mass uptake, with some focusing on the use of their cryptocurrency to squeeze personal life issues as well as crucial day-to-day issues with the intention of making them indispensable in everyday life.
If a fiat currency, such as USD or GBP, is inflated, its price rises and its purchasing power declines. This will then cause cryptocurrencies (let's use Bitcoin as an example) to increase in terms of this fiat. The result is that you will be able to acquire more of this fiat with each bitcoin. In fact, this situation has been one of the main causes of Bitcoin & # 39; s price increase.
History of scams and cyber attacks
Scams and hacks are also core 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 scammers; they pump up the price of cryptocurrency to attract unsuspecting individuals, and when their hard-earned money is invested, the price is cut by the scammers who then disappear without a trace.
Therefore, it is imperative to be wary of cryptocurrency scams before investing your money.
Some other factors to consider that have an impact on the value of cryptocurrencies include:
Manner where cryptocurrency is stored, as well as its utility, security, ease of acquisition and cross-border acceptability
The strength of the community that supports cryptocurrency (this includes funding, innovation and loyalty of members)
Low associated risks of cryptocurrency as perceived by investors and users
Market liquidity and cryptocurrency volatility
Country rules (this includes banning cryptocurrency and ICOs in China and its acceptance as legal tender in Japan)