SO HOW EXACTLY DOES Cryptocurrency Gain Value?

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Cryptocurrencies will be the latest ‘big thing’ in the digital world and have now been recognized as being the main monetary system. In fact, enthusiasts have tagged it as ‘the revolution of money’.

In clear terms, cryptocurrencies are decentralized digital assets that may be exchanged between users with no need for a central authority, the majority of which being created via special computation techniques referred to as ‘ mining ‘.

The acceptance of currencies, like the US Dollar, Great British Pound and the Euro, as legal tender is basically because they have been issued by a central bank; digital currencies, however, such as cryptocurrencies, are not reliant on the confidence and trust of the general public on the issuer. Therefore, several factors determine its value.

Factors that Determine the worthiness of Cryptocurrencies

Principles of Free Market Economy (Mainly Supply and Demand)

Supply and demand is really a major determinant of the worthiness of anything of value, including cryptocurrencies. The reason being if more people are willing to buy a cryptocurrency, and others are willing to sell, the cost of that particular cryptocurrency will increase, and vice versa.

Mass Adoption

Mass adoption of any cryptocurrency can shoot its price to the moon. This is due to many cryptocurrencies having their supply capped at a specific limit and, according to economic principles, an increase popular without a corresponding upsurge in supply will lead to a cost increase of this particular commodity.

Multiple cryptocurrencies have invested more resources to make sure their mass adoption, with some concentrating on the applicability of their cryptocurrency to pressing personal life issues, and crucial day-to-day cases, with the intention of earning them indispensable in everyday activity.

Fiat Inflation

If a fiat currency, like the USD or GBP, becomes inflated, its price rises and its own purchasing power drops. This can then cause cryptocurrencies (let’s use Bitcoin as an example) to increase with respect to that fiat. The result is that you will be able to acquire more of that fiat with each bitcoin. Actually, this situation has been one of the major known reasons for Bitcoin’s price increase.

Scams and Cyber Attack History

Scams and hacks may also be core factors affecting the value of cryptocurrencies, as they are recognized to cause wild swings in valuations. Occasionally, the team backing a cryptocurrency could be the scammers; they’ll pump the price of the cryptocurrency to attract unsuspecting individuals and when their hard-earned money is invested, the price is shortened by the scammers, who then disappear with out a trace.

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