Where Do Cryptocurrencies Get Their Value? – NAGA
Cryptocurrencies are volatile, and we all are well aware of it. The news about recent crypto highs and lows pops up every day in our feeds, making for the general impression that crypto is a tricky thing to deal with.
Nevertheless, investing in crypto can still be a lucrative investment opportunity, if you know how its value is formed. The following piece sums up common factors affecting the value of digital currencies and indicators, reflective of their truthful value.
So what is behind the crypto value?
Like any currency, cryptocurrencies gain their value based on the scale of community involvement (like the user demand, scarcity or coin’s utility). Still, having in mind, most of the digital coins on the market are issued by private blockchain-related corporations, some factors of crypto value will stem from the image and efficiency of these companies (like project’s viability and perceived value). Let us make a general overview of what makes cryptocurrencies valuable.
Coin’s Utility
To make a cryptocurrency valuable one needs to make it utile. Any cryptocurrency is primarily a manifestation of using a decentralized digital ledger — blockchain technology. So to make your crypto coin utile, you need to make it usable within a certain blockchain ecosystem.
Let us take Ethereum as a use case. You cannot start using the Ethereum platform without an Ether — a coin, specially tailored to “fuel” the transactions within the Etereum platform. Accordingly, the value of Ethereum depends on the demand for the platform’s services.
Cryptocoins’ utility can also include dividend payments, mode of exchange within a blockchain ecosystem, voting rights etc.
Read more about the scarcity, the perceived value of the project, as well as the market cap here.
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Published at Mon, 23 Dec 2019 08:03:32 +0000
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