How does cryptocurrency get value?

Cryptocurrencies are the latest “big thing” in the digital world and are now recognized as part of the monetary system. In fact, enthusiasts have labeled it a “money revolution.”

Simply put, cryptocurrencies are decentralized digital assets that can be exchanged between users without the need for central government, most of which are created through a special computing technique called “mining”.

The acceptance of currencies such as the US dollar, the British pound and the euro as legal tender is due to the fact that they were issued by the central bank. Digital currencies, however, such as cryptocurrencies, are not based 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 և demand)

Supply և Demand is a major determinant of the value of anything, including cryptocurrencies. This is because if more people are willing to buy cryptocurrency and others are willing to sell, the price of that cryptocurrency will rise and vice versa.

Mass adoption

The mass adoption of any cryptocurrency could push its price higher on the moon. This is due to the fact that many cryptocurrencies have their supply to a certain extent, ըստ, according to economic principles, an increase in demand without a corresponding increase in supply will lead to an increase in the price of the product.

Many cryptocurrencies have invested more resources in securing their widespread acceptance, and some have focused on the use of their cryptocurrencies in urgent personal matters, such as day-to-day events, in order to make them indispensable in everyday life.

Fiat inflation

If a fiat currency, such as the US dollar or the GBP, inflates, its price rises and its purchasing power decreases. Then it will lead to an increase in cryptocurrencies (let’s use Bitcoin as an example) over that fiat. The result is that you will be able to get more of that Fiat with each bitcoin. In fact, this situation was one of the main reasons for the rise in the price of Bitcoin.

Fraud և Cyber ​​attack history

Fraudsters և hackers և are the main factors influencing the value of cryptocurrencies, as they are known to cause sharp fluctuations in estimates. In some cases, the cryptocurrency support team may be fraudsters. they will raise the price of cryptocurrency to undoubtedly attract individuals, և when their hard-earned money is invested, the price is reduced by fraudsters, who then disappear without a trace.

So you need to beware of cryptocurrency scams before investing your money.

Some other factors to consider that affect the value of cryptocurrencies include:

  • How to keep cryptocurrency, as well as its usefulness, security, ease of acquisition, cross-border acceptance

  • The strength of the cryptocurrency support community (this includes funding, innovation, and the loyalty of its members)

  • Low cryptocurrency risks perceived by investors և users

  • News mood

  • Cryptocurrency market liquidity և instability

  • Country regulations (this includes the ban on cryptocurrencies և ICOs in China ընդուն its acceptance as a legal tender in Japan)