Home Business What Determines the Value of a Cryptocurrency – 2020 Guide

What Determines the Value of a Cryptocurrency – 2020 Guide

by Dangula Bingula

Everything regarding cryptocurrencies revolves around the technology on which they’re based. Those currencies that are decentralized are hard to censure, and there are no ways you can turn them off. Besides the technology that keeps crypto in place, we have another beneficial factor – safety.

Of course, there were situations when due to error in coding, hackers were able to exploit the cryptocurrencies, but all in all, cryptocurrencies offer more safety than some fiat ones. In the end, we have the value they offer. You can invest and earn money on crypto. But where does all that value come from? We are here to give an answer to what determines the value of a cryptocurrency in our 2020 Guide. Keep reading and find out.

Competition

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Bitcoin is the king of the cryptocurrency jungle, but this doesn’t mean it has not pretenders to the throne. While currently it easily retains its domination, there are thousands of cryptocurrencies trying to become what BTC is on the financial market.

As of January of 2020, the following cryptos are trailing BTC: Ethereum, XRP, Bitcoin Cash, Litecoin, and EOS, just to name a few. In addition to these already established cryptocurrencies, we have new ones emerging every day.

There are no regulations stopping cryptocurrencies from coming to life, and without obstacles, they tend to do so. Because of the market, overflown with new cryptocurrencies, investors can keep pushing their money, as the prices do not explode.

The BTC still holds the edge because it gained widespread recognition, and it’s easy to notice in this particular market, as stated by bitcoinpro. If you want to become a bitcoin pro, nothing is stopping you. The time could be the right one right now.

Node Count

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Another essential factor is the node count. But what is it, and how it works? Well, node count indicates the value of crypto by counting the number of active wallets. This number is publicly accessible, and anyone can see it. Tanks to this, you check out on your own if a currency has a fair price. This can be done by comparing the total market capitalization of specific crypto, the node count, and another cryptocurrency, and you’ll be able to establish its approximate value.

Another thing that you can see through the node count is the strength of a particular crypto community. Healthy communities have more nodes. If you follow their development closely, you can even predict when particular crypto will enter a crisis.

Rising demand

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The demand for cryptocurrencies increased because of the rise in trustworthy exchanges. They’re easy to use, and many people took advantage of this, so the value of crypto increased due to more users. They’re becoming so popular that many companies and businesses are starting to use it as standard currency. Those who still haven’t done this are searching for ways to follow the trend. Because of this, logically, the value of crypto continued to grow.

Crypto is similar to anything else of value that can be traded. Digital currencies are on the market; they can be traded, and when the situation is like this, their value exponentially grows. When there are people willing to sell, and those willing to buy on the other side, there’s no reason for price not to go up. If the situation is static, the value will drop. As you probably know, the supply of all crypto is limited, and because of this, more people are interested in it, which is yet another reason for their constant rise in value.

Mass Adoption

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Regardless if it is a regular one or it is a cryptocurrency. Once the broad masses accept it, it gains value. The things was the same as the US dollar and the European Union Euro. With cryptocurrencies, every time the demand increases is price skyrockets. The reason is the limitations set on cryptocurrencies. While many people are dealing with crypto every day, it is not widely accepted by virtually anyone.

So, what’s the next step for them, and how to become a thing of the masses? The first thing would be for cryptocurrencies to be accepted by a means of payment in everyday life. This would mean that they have become what fiat currencies are. This is something we can expect to happen in the future.

Inflation of fiat currencies

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For example, when the price of a certain fiat currents drops, the cost of BTC would go up compared to that same currency. The reason is simple. Because it now values less, more of that currency can now be bought with less Bitcoin. This is something that happens as we speak because more countries are printing their money to keep the interest low. Of course, this is an artificial way to do it.

Production Cost

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The cost of production is tied closely to the value of particular crypto. If we are talking about Bitcoin, then you should already know that its production is not cheap. The reason why BTC has as much value is that it requires many resources and energy to mine it. You also know the type of hardware needed to mine it, and this hardware also needs to be manufactured and costs money.

Many people claim that the energy required to create BTC goes to waste. This is not true. Because of the way it needs to be done, the users are guaranteed safety, and the governments are kept out of the process. While we speak, there’s no easy way for any government to break the BTC block-chain easily, and the work is in progress to make the entire process even more efficient.

Conclusion

As you can see, the value of crypto is affected by many factors, but one thing is sure – it gains value with time passing. The number of transactions made by BTC and similar cryptocurrencies grows every year. The trend is on for some time now, but it’s hard to tell it will continue. The changes in prices can be expected, for better or worse. If you want to invest, there are risks to be accepted. But, this is the same with all investments.

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