Why Cryptocurrency Has Value
What influences the price of Bitcoin and other cryptocurrencies?
In comparison with fiat currency, the crypto has some advantages. This is because over time, money is inflated. And the Central Bank plays a big part in it. Cryptocurrency is eventually exposed only to the reverse process – deflation. This is influenced by the constant growth of world production and its limited volume in the market. Thus, it generates demand, which determines the price of the cryptocurrency.
Why is cryptocurrency becoming more valuable?
First, it was really difficult to realize that not only the state is able to issue money. However, imagine that we actually accept a monetary unit as payment for a good or service only because there is certainty – other market participants will accept these funds and provide their services respectively.
Why cryptocurrency has value?
Careful consideration of the system’s operation, its protection from the inflationary process and the absence of the fraud possibility raise the popularity of the cryptocurrency. Demand was also generated with the initial desire of some participants to sell their services and products for this currency.
After the world system abandoned the “gold standard”, money began to depend on the states’ production capability and the policies of their governments. Cryptocurrencies do not have such uncertainty.
What determines the price of the crypto:
- The limited demand and supply;
- Use of the blockchain system;
- The utility of the currency, its ease of use and storage;
- Perception of its value by the public;
- Its cost;
- Media opinion;
- Investors’ deposits;
- Fraud impossibility;
Due to the fact that the cryptocurrency is a developing market, due to the changes it imposes on the financial system, the market is still unstable. In combination with many of the above factors, the price of a digital currency can quickly grow and fall, which makes it a risky investment without proper research. However, the advantages make it suitable for payments processing and investing. The latter was actually one of the initial intentions of Bitcoin.