Cryptocurrencies are the latest ‘big thing’ in the digital world and have now been accepted as being area of the btc usd investing monetary system. In fact, enthusiasts have tagged it as ‘the innovation of money’.
In clear terms, cryptocurrencies are decentralized digital assets that can be exchanged between users without the need for a central authority, the majority of which being created via special working out techniques referred to as ‘mining’.
The acceptance of currencies, like the US Dollar, Great British Pound and the Euro, as legal tender is really because they are issued by a central bank; digital currencies, however, such as cryptocurrencies, are not reliant on the confidence and trust of the public on the issuer. Therefore, 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, among others are willing to sell, the price of that particular cryptocurrency will increase, and vice versa.
Mass usage of any cryptocurrency can shoot its price to the moon. 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 matching increase in supply will lead to a price increase of the particular particular product.
Multiple cryptocurrencies have invested more resources to ensure their mass usage, with some focusing on the applicability of their cryptocurrency to pressing personal life issues, as well as crucial day-to-day cases, with the objective of making them imperative in everyday living.
If a fiat currency, like the USD or GBP, becomes overpriced, its price rises and its purchasing power declines. 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 the particular fiat with each bitcoin. In fact, this example has been one of the major reasons for Bitcoin’s price increase.