Cryptocurrencies are the new digital ‘big thing’ and have now been accepted as a part of the monetary system. In reality, it has been branded by enthusiasts as ‘the money revolution.’
Cryptocurrencies are, in clear terms, digital decentralized assets that can be exchanged between users without the need for a central authority, most of which are created using special computing techniques called ‘mining.’ Checkout cryptocurrency news for more info.
Acceptance of currencies such as the US Dollar, Great British Pound and the Euro as a legal tender is because they were issued by a central bank; however, digital currencies such as cryptocurrencies are not dependent on the public’s faith and trust in the issuer. As such, its worth is calculated by many factors.
Factors Determining the Cryptocurrencies worth
The Free Market Economic Concepts (mainly Supply and Demand)
Supply and demand are a significant determinant of the value of value of something, including cryptocurrencies. This is because if more people are willing to purchase a cryptocurrency and others are willing to sell it will increase the price of that particular cryptocurrency, and vice versa.
Any crypto-currency ‘s mass adoption could 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 in demand without a corresponding increase in supply will result in an increase in the price of that particular commodity.
Numerous cryptocurrencies have spent more money to ensure their mass acceptance, with others concentrating on their cryptocurrency’s applicability to pressing personal life problems, as well as important day-to-day situations, with the goal of rendering them indispensable in daily life.
When a fiat currency, such as the USD or GBP, gets inflated, its price increases and its purchasing power decreases. This will then cause an increase in cryptocurrencies (let’s use Bitcoin as an example) regarding that fiat. The result is that each bitcoin will allow you to acquire more of that fiat. This situation has, in fact, been one of the major reasons for the price increase for Bitcoin.
The history of scams and cyber-attacks
As they are known to cause wild swings in valuations, scams and hacks are also core factors affecting the value of cryptocurrencies. In some situations, the team that supports a cryptocurrency may be the scammers; they may pump the cryptocurrency price to attract naive people, and when their hard-earned money is invested, the scammers shorten the price, which then vanish without trace.