The news about recent crypto highs and lows pops up every day in our feeds, making for the general impression that crypto is a tricky thing to deal with. Nevertheless, investing in crypto can still be a lucrative investment opportunity, if you know how its value is formed.
The following piece sums up common factors affecting the value of digital currencies and indicators, reflective of their truthful value. Let us make a general overview of what makes cryptocurrencies valuable. To make a cryptocurrency valuable one needs to make it utile. Any cryptocurrency is primarily a manifestation of using a decentralized digital ledger — blockchain technology. So to make your crypto coin utile, you need to make it usable within a certain blockchain ecosystem.
Let us take Ethereum as a use case. Accordingly, the value of Ethereum depends on the demand for the platform's services. Scarcity stands for the finite nature of the digital coins. In the perfect scenario, the demand should excel the supply of the coins, to make it more valuable. For example, the finite supply of Bitcoin never goes beyond 21 million coins. As the most popular crypto in the market, Bitcoin thus enjoys great demand and a rise in value.
Perceived Value of the Project Any cryptocurrency value depends on the overall viability and progress of the project development. Projects that keep developing, achieving one milestone after another, establishing lucrative partnerships or launching user-friendly software becomes more valuable in the eyes of the market. All of these are indicators, largely contributing to the positive sentiment around the project and affecting the value of its cryptocurrency.
Why Market Cap matters more than the individual coin price? The Market cap index is determined by multiplying the total circulating supply by the individual price of the coin. When authorities indicate that they could ban or strictly regulate Bitcoin, prices go down. But when they are warmer or less firm prices go up. Drops happen for exactly the same reason. Bitcoin, like diamonds or gold, has a finite supply though the cryptocurrency has an actual cap while precious metals and gemstones exist in unknown quantities.
Roughly 19 million bitcoins of the hard total of 21 million have been mined, which means they can be bought and sold. The halving schedule is an inflationary control device where the reward for mining bitcoin is cut in half. This process discourages mining because it raises the cost required to mine a bitcoin, which discourages people from doing it especially when the price of the cryptocurrency has fallen. The price of Bitcoin does not track based on any predictable data. It moves up or down based based on how people feel about the cryptocurrency at any given time.
When buyers outnumber sellers the price goes up. And, of course, influencers and celebrities have the ability to move the price of various cryptocurrencies. Sometimes that's for no reason at all or because the famous person wants the price to go up or down and sometimes for a semi-meaningful one like that a company will accept on form or crypto or another as payment. Bitcoin, like any other cryptocurrency, collectible, and many rare items can be manipulated. In many ways, however, this works a bit like large-cap stocks versus penny stocks.
Because penny stocks trade at lower volumes than large-cap stocks, they're harder to manipulate. As the sort of king of crypto, bitcoin can't be manipulated as easily as smaller cryptocurrencies simply because it trades at much higher volumes. Free Newsletters. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more.
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The value of cryptocurrency is determined by supply and demand, just like anything else that people want. crptocurrencyupdates.com › financials › cryptocurrency-stocks › value-of-crypto. Will Bitcoin's Price Increase? As Bitcoin nears its maximum limit, demand for its cryptocurrency is supposed to increase. The increased demand and limited.