Cryptocurrencies are the latest ‘big thing’ in the digital world, and have now been recognized as part of the monetary system. In fact, enthusiasts marked it as the “money revolution”.
In clear terms, cryptocurrencies are decentralized digital assets that can be exchanged between users without the need for centralized authority, most of which are created via special computation techniques referred to as mining.
The acceptance of currencies, such as the US dollar, British pound, and the euro, as a legal tender is that they are issued by a central bank; As such, there are several factors that determine their value.
Factors determining the value of cryptocurrencies
Principles of a free market economy (mainly supply and demand)
Supply and demand are a key determinant of the value of anything of value, including cryptocurrencies. This is because if more people are willing to buy a cryptocurrency, and others are willing to sell, the price of that particular currency will rise, and vice versa.
The universal adoption of any cryptocurrency can be called its price on the moon. This is because many cryptocurrencies have limited their supply to a certain extent, and according to economic principles, an increase in demand without a corresponding increase in supply will increase the prices of that particular commodity.
Multiple cryptocurrencies have invested more resources to ensure their widespread adoption, focusing on the applicability of their cryptocurrency to pressing personal life issues, as well as critical daily situations, with the aim of making them indispensable in everyday life.
If a paper currency, like the US dollar or pound sterling, swells, its price rises and its purchasing power drops. This will then increase the cryptocurrencies (let’s use Bitcoin as an example) in relation to this. The result is that you’ll be able to get more of this with every bitcoin. In fact, this position was one of the main reasons for the rise in Bitcoin prices.
Kik is hardly the first crypto company to have been the subject of fraud or misreporting. In July, the Tron Foundation’s Justin Sun was reported to have been arrested for investigations in China. It turned out, however, that the Sun was recovering from kidney stones, resting in San Francisco. In 2017, Ethereum founder Vitalik Buterin was the subject of a death scam, originating from the online 4chan forum.
Mistakes are as old as money, and the history of finance is mixed with examples of fraud and evil. From England’s 18th Century in the South Sea to the percent equity schemes set up by Wolf of Wall Street, investors are often burned by the very good prospects of being real.
Part of this is endemic to any emerging industry, where entrepreneurs make bold claims about what their companies can achieve. The emotions and hyperbole surrounding bitcoin and cryptocurrency also appear to have infected crypto journalism, whether it was reporting to the NSA developing a cryptocurrency (that’s not) or unmasking Satoshi Nakamoto (they got the wrong guy).
Fraud and history of cyber attack
Fraud and penetration are key factors affecting the value of cryptocurrencies, as they are known to cause huge fluctuations in valuations. In some cases, the team that supports a cryptocurrency may be crooks; they will pump the price of the cryptocurrency to attract unsuspecting individuals, and when their hard earned money is invested, the price is shortened by scammers who disappear without a trace.
It is therefore important to be wary of encrypted scams before investing your money.
Some other factors to consider that have an impact on the value of cryptocurrencies include:
- The way cryptocurrency is stored, as well as its usefulness, security, accessibility and acceptance across borders
- The strength of the community that supports cryptocurrency (including finance, innovation and loyalty of its members)
- Reduced risk associated with cryptocurrencies as seen by investors and users
- Morale news
- Market liquidity and cryptocurrency volatility
- State regulations (including the prohibition of cryptocurrency and ICOs in China and their acceptance as a legal tender in Japan)