Everything comes with its own set of advantages as well as disadvantages. The same goes for cryptocurrency. What is crypto? Crypto is a form of decentralised digital asset with a highly volatile nature and price value in the global market. Working under a decentralised public ledger known as the blockchain, the digital coins has now gained a popular position among the youth and potential investors from all around the globe. It was developed by an anonymous Satoshi Nakamoto in 2008 after which it has undergone tremendous changes leading to both positive and negative results.
The asset was banned and limited in different countries such as China, Morocco, Egypt, Algeria etc however was also widely accepted in major countries contributing to the sudden growth and spread of the bitcoin era. When analysed and functioned via the right strategies and prior experienced knowledge, crypto is a game-changer and revolves around various factors controlling it. To analyse in order to be a master investor and catch higher profit values in the never-ending world of digital payments and cryptocurrency.
Unlike traditional investment methods, crypto is not regulated by any government or central authority, establishing it as completely independent. Buying bitcoin is somewhere different from stocks or bonds as it is not a corporation with no corporate balance sheets. Distinct aspects apart from supply and demand regulated the price value and market behaviour of this digital asset which becomes crucial for its value.
Factors That Affect the Value Of Cryptocurrency
1. COIN UTILITY
As cryptocurrency is essentially a manifestation of using the blockchain technology, a decentralised public ledger, the utility of coins plays a major role in improving the price value of crypto. One needs to make it more usable in order to improve the utility in the blockchain environment. Several other aspects such as payments of dividends, mode of exchanges, voting rights within the decentralised environment drive the functioning of coin utility and thus the price value of cryptocurrency.
2. COST OF PRODUCTION
In order to produce new tokens or to verify transactions, miners use specialised hardware and servers to solve crypto equations. The process consumes a large amount of electricity which thereby increases the production cost affecting the value of bitcoins and altcoins. Miners are also rewarded with virtual tokens and network fees for contributing their efforts. As a result, higher mining cost results in higher crypto value and vice versa. However, this is not uniform across all altcoins and requires research before investing and trading.
3. CRYPTO EXCHANGES
If one token is valuable on multiple crypto exchanges, the rate of buyers using the token increases. Two or more exchanges for usage requires swapping between crypto take and a fee for each swap which ultimately increases the investment cost.
4. MARKET COMPETITION
There are several coins available in the market right now, all aiming to establish themselves well in the global market. From meme coins, celebrity coins, to soccer team coins all are viable cryptocurrencies projected that will overcome the limitations and thus build a stronger network among its users. Higher market competition affects the price value of cryptocurrency as more and more people are using tokens and coins at a tremendous rate.
5. MASS ADOPTION
The price value of cryptocurrency can hit the roof depending on its mass adoption. The increase in demand ultimately increases the price as the availability of cryptocurrencies units are limited in the market. However, if these units are accepted as a medium of exchange in transactions, the demand and price will rise even further.
6. GOVERNMENT REGULATIONS
Due to the fact that crypto is becoming more mainstream, the chances of it getting regulated or controlled by an authority or government becomes relatively high. This regulation imposition would result in the centralization of digital money, affecting the cryptocurrency price ultimately.
Apart from volatility, various other factors contribute to the rise and fall of crypto, making wild fluctuations all around. As more and more people continue to enter the crypto industry and show their interest in blockchain technology and public ledgers, the government attempts to bring crypto under its control. From crypto exchanges to mass adoption, each factor affects the value of cryptocurrency to a major extent.