Cryptocurrencies are part of common life today, although not in full swing their adoption has started to take place. As time passes and people start to adopt cryptocurrencies for common usage, the most important question appears. What is a cryptocurrency, and what makes a cryptocurrency? Cryptocurrencies are simply digital assets, that are made on the account of an underlying technology, blockchain. A blockchain is a consensus mechanism, and all transactions are recorded, irrefutable, and appear to have no change once made.
No one can make changes or forge a transaction once it is executed. If you have a digital currency in your wallet, it is under your ownership. Digital assets are virtual forms and visualizations of your wealth and assets. You can obtain ownership of your assets and even trade them via online trading platforms. As a beginner, if you want to invest in crypto and successfully you reap profits, by making an account on a centralized exchange such as Binance, OKX, and KuCoin.
Then you would be aware of how the trade works and how you earned a substantial figure. But apart from centralized exchanges, many hybrid crypto trading platforms are actively helping new users to trade with ease. One of the popular ones is Bitflex, which provides centralized as well as decentralized modes of crypto acquisition. We will now look into the facets as well as factors that make up any digital asset. And what constitutes its price and value?
Trading in Crypto
Trading in crypto is no different from traditional trading forums and platforms. Just as traditional trading platforms provide spot and future market options, trading in crypto works the same. The main differential points are crypto as a distinct set of assets and that too in a digital format. Something that is intangible but still holds considerable importance and store of value.
As in traditional stocks and their trading, the company’s reputation is the main indicator of its success and the rise in the price of the shares. In the same way, the sentiments of the majority determine the price of the asset. Crypto has more inclination to be used in major financial transactions. But the store of value and tradable assets are all harnessed to the idea of its investors making it and labeling it as valuable. We have a classic example of Bitcoin as the only cryptocurrency, that has withstood the changes of time and came up as an antifragile coin and currency.
Determining the Value of a Cryptocurrency
The quantum of activity going around any cryptocurrency determines what price it would gain. In this process, the exchanges whether centralized such as Binance, KuCoin, or Huobi Global or a hybrid exchange also called centralized and decentralized exchanges such as Bitflex are commonly responsible for making any token or coin important and prominent in the eyes of the users and public. A substantial number of people come across a cryptocurrency, and their interest in acquiring it and then trade it
increases. Whether a trader is doing long or short, the underlying currency is always in circulation and usage. The other main reasons behind the value determination are its demand and supply. Supply is mostly dependent upon how much new currency is mined and produced and then how much would be in circulation to use. While the hike in price is dependent upon the limited supply and more demand. To see things from a wider perspective, we must look at the other factors that determine the cryptocurrency price.
How Does Cryptocurrency Value Increase?
As the value of cryptocurrency is not only limited to the factors of demand and supply but some intricate factors always play a key role. We will now see what other major and minor factors are used to increase the value of any cryptocurrency. Let us look at those key factors and indicators.
Hodling (Buying Low and Selling High)
When people or masses project a particular digital asset as valuable, they try to buy it at the lowest price caps and then hold it for some amount of time while waiting for the prices to be high due to the limited supply in the market. If with a limited supply, the buyers still want to buy at higher prices, then there are chances for a further hike in the price of that coin or token. We share the classic example of Bitcoin, as the most reliable store of value.
Since the people or investors who bought it with the mindset to hold it and reap the 10x returns, still have not sold it thus creating a certain level of the market price for Bitcoin. Even though as of today 10th of November 2022 the prices of Bitcoin are at the $16,000 price range hitting a year-low range, Bitcoin still holds the vivacity to strengthen itself back with time. No matter how long the crypto winter permeates, the coin just has a limited supply. That makes it more valuable as time passes.
Mining
The process of mining is also what constitutes the value and price of a cryptocurrency. The limited supply and its mining occurring in parallel constitute its price and importance. As in the case of Bitcoin, the total number of BTCs to be mined is 21 million and once this figure is achieved, the coin would have a stable supply, and investors, as well as buyers, can configure its price to its demand.
Hike-In Use Cases
As the crypto or a particular token or coin increase its use case or utility there are stark chances for its price to go up. Even in the perpetual swaps market, there are more long positions placed by crypto traders and experts to reap maximum leverage and profits. With time, as more people are into buying and selling a particular token or a coin, there is a stronger chance for it to be more popular thus increasing further price increase, and that too for the long term.
Many other cryptocurrencies follow the same pattern of mining as well as burning a specific supply of tokens. This not only stabilizes the token or that crypto but increases the value of cryptocurrency with time. An extra benefit attached to this process is that the miners can mine more thus working as a popularity indicator for that currency.
Media Limelight
The more media importance and traction a particular token carries, there is higher the chance for it to grow in momentum. We mostly ask this question about what makes a coin valuable cryptocurrency or what makes a good currency. The answer is good public relations and a strong community. Nowadays many new and popular cryptocurrencies exhibit strong and active communities, but the main indicators of a cryptocurrency’s success are its initiative and what sort of innovative technology it is working upon.
0 Comments