When entering the trend of cryptocurrencies, one of the unknowns that attracts the most attention is knowing how these currencies increase and decrease in value almost for no apparent reason, however, everything is more complex and precise than it seems.
What determines the value of a cryptocurrency?
Cryptocurrencies are a new asset that works on the web, it circulates around the world and has different uses. Cryptocurrencies tend to have a fairly unstable price, but this is due to a series of characteristics that are responsible for determining the value of said asset. Among the things that determine the value of a cryptocurrency are the following:
1- Trust, an essential factor for these new cryptocurrencies
One of the qualities that he highlighted in Bitcoin and for that reason it became the cryptocurrency with the highest price in the market, was the trust it generated in the public. Any cryptocurrency that wants to succeed today must generate confidence in potential investors, this is achieved through the support that can be obtained from large and trusted entities.
Getting the support of large entities to improve the popularity of a digital currency is something that many platforms that have their own cryptocurrency have done, such as Ripple, IOTA, among others.
2- Supply and demand, one of the most influential factors
The buying and selling operations in the cryptocurrency market is one of the factors that greatly influences, in other words, if people buy cryptocurrencies, their value tends to rise, while when people sell, the value of cryptocurrency goes down.
Similarly, cryptocurrency hoarders also influence the price of the cryptocurrency, since they use the market to obtain cryptocurrencies, but they do not sell them, they accumulate them to create a speculative market around these virtual currencies.
It is worth mentioning that this is one of the factors that most influences the value that a cryptocurrency may have.
3- Utility, a factor that will be much more influential in the future
Cryptocurrencies are classified, and currently have various utilities, although they all share the peculiarity of being able to carry out transactions anywhere in the world through a wallet, cryptocurrencies have special qualities that differentiate them.
Just as the main quality of Bitcoin is to be able to carry out transactions globally quickly and easily, other well-known cryptocurrencies such as: Ethereum, IOTA, TRON, Bitcoin Cash or other assets, have certain utilities such as making smart contracts, synchronizing appliances that work with IoT, store data for free, as well as send and receive them, among others.
The utility that can be given to cryptocurrencies influences the price that said cryptocurrency has, since, the more useful it can be, the more people will want to acquire said cryptocurrency and therefore, the demand will increase, which as is mentioned above, it directly affects the price of a digital currency.
At this point, it is extremely important to mention that many entities around the world are developing new technologies to increase the usefulness of cryptocurrencies, therefore, despite the fact that currently the utility that can be given to cryptocurrencies It is somewhat limited compared to the use that can be given to fiat money, this does not mean that it will always be this way, since everything points to, that the use of cryptocurrencies will increase in the future and therefore, the price of these will go in increase.
As we always say in CryptoTendency, it is important to know how to choose the projects that have something to offer, since those are the ones that will last over time.