Cryptocurrencies are the latest ‘big thing’ in the digital world and are now recognized as part of the monetary system. In fact, enthusiasts labeled it a ‘money revolution’.
Cryptocurrencies, to put it bluntly, are centralized digital assets created by special computational methods, often referred to as ‘mining’, that can be exchanged between users without the need for a centralized body.
The adoption of currencies such as the US dollar, the British lira and the euro as legal tender, because they are issued by the central bank; digital currencies, such as cryptocurrencies, do not trust the public’s trust and confidence in the issuer. Thus, its value is determined by several factors.
Factors determining the value of cryptocurrencies
Fundamentals of Free Market Economy (Mainly Demand and Demand)
Supply and demand are key factors in determining the value of any value, including cryptocurrencies. Because if more people want to buy cryptocurrency and others want to sell it, the price of that cryptocurrency will increase, and vice versa.
The mass adoption of any cryptocurrency can lower its price for months. This is due to the fact that the supply of many cryptocurrencies is limited, and according to economic principles, an increase in demand without a corresponding increase in supply will lead to an increase in the price of that commodity.
Many cryptocurrencies have invested in more resources to ensure mass adoption; some have focused on the application of cryptocurrencies to current personal problems and everyday issues in order to make them indispensable in everyday life.
If a Fiat currency such as the USD or GBP is inflated, the price rises and purchasing power decreases. This will lead to an increase in cryptocurrencies (let’s use Bitcoin as an example) associated with this fiat. The result is that you can get more fiat with each bitcoin. In fact, this situation has been one of the main reasons for the rise in the price of Bitcoin.
History of Scammers and Cyber Attacks
Fraudsters and hackers are the main factors influencing the value of cryptocurrencies, as they are known to cause wild changes in valuations. In some cases, the team that supports cryptocurrency can be scammers; they will undoubtedly hit the price of cryptocurrency to attract people, and when the hard-earned money is invested, the price is reduced by fraudsters and then disappears without a trace.
That’s why it’s important to be wary of cryptocurrency scammers before investing your money.
Some other factors that will affect the value of cryptocurrencies include:
Rules of conduct in which cryptocurrency is maintained, as well as its benefits, security, ease of access and cross-border acceptance
The strength of a cryptocurrency-supported society (including funding, innovation, and member loyalty)
Low-related risks of cryptocurrency accepted by investors and users
Market liquidity and volatility of cryptocurrency
Country regulations (including the ban on cryptocurrencies and ICOs in China and their adoption as legal tender in Japan)