Cryptocurrencies are the latest ‘big thing’ in the digital world and have now been thought to be being the main monetary system. In fact, enthusiasts have how to earn bitcoins on android tagged it as ‘the wave of money’.
In clear terms, cryptocurrencies are decentralized digital assets that can be exchanged between users without necessity for a central authority, the majority of which being created via special calculation techniques referred to as ‘mining’.
The acceptance of stock markets, like the US Dollar, Great British Pound and the Euro, as legal tender happens because they’ve been issued by a central bank; digital stock markets, however, such as cryptocurrencies, are not reliant on the confidence and trust of the public on the issuer. As a result, several factors determine its value.
Factors that Determine the value of Cryptocurrencies
Principles of Free Market Economy (Mainly Supply and Demand)
Supply and demand is a major determinant of the value of anything of value, including cryptocurrencies. This is because if more people are willing to buy a cryptocurrency, yet others are willing to sell, the price of that particular cryptocurrency will increase, and vice versa.
Mass adopting of any cryptocurrency can shoot its price to the silent celestial body. This is due to many cryptocurrencies having their supply capped at a particular limit and, according to economic principles, an increase in demand without a related increase in supply will lead to an amount increase of these particular item.
Multiple cryptocurrencies have invested more resources to ensure their mass adopting, with some focusing on the applicability of their cryptocurrency to pressing personal life issues, as well as crucial day-to-day cases, with the purpose of making them crucial in everyday activity.
If a fiat currency, like the USD or GBP, becomes filled with air, its price rises and its purchasing power falls. This will 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 these fiat with each bitcoin. In fact, this case has been one of the major reasons for Bitcoin’s price increase.