Cryptocurrencies will be the latest ‘big thing’ in the digital world and have now been recognized as being portion of the monetary system. In Spice , enthusiasts have tagged it as ‘the revolution of money’.
In clear terms, cryptocurrencies are decentralized digital assets which can be exchanged between users with no need for a central authority, nearly all which being created via special computation techniques known as ‘mining’.
The acceptance of currencies, like the US Dollar, Great British Pound and the Euro, as legal tender is basically because they have been issued by way of a central bank; digital currencies, however, such as cryptocurrencies, aren’t reliant on the confidence and trust of the public on the issuer. Therefore, several factors determine its value.
Factors that Determine the worthiness 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. For the reason that if more people are willing to buy a cryptocurrency, and others are willing to sell, the price of that particular cryptocurrency will increase, and vice versa.
Mass adoption of any cryptocurrency can shoot its price to the moon. That is because of many cryptocurrencies having their supply capped at a specific limit and, according to economic principles, an increase popular without a corresponding upsurge in supply will lead to a cost increase of that particular commodity.
Multiple cryptocurrencies have invested more resources to ensure their mass adoption, with some focusing on the applicability of these cryptocurrency to pressing personal life issues, and crucial day-to-day cases, with the intention of making them indispensable in everyday life.
If a fiat currency, like the USD or GBP, becomes inflated, its price rises and its purchasing power drops. This will then cause cryptocurrencies (let’s use Bitcoin as an example) to increase with respect to that fiat. The result is you will be able to acquire more of this fiat with each bitcoin. Actually, this situation has been one of the major known reasons for Bitcoin’s price increase.
Scams and Cyber Attack History
Scams and hacks are also core factors affecting the worthiness of cryptocurrencies, because they are known to cause wild swings in valuations. Occasionally, the team backing a cryptocurrency could be the scammers; they’ll pump the cost of the cryptocurrency to attract unsuspecting individuals and when their hard-earned money is invested, the purchase price is shortened by the scammers, who then disappear with out a trace.