Cryptocurrencies are very volatile as their value keeps changing from time to time. However despite these fluctuations, cryptocurrency have proven that it is here to stay. More different cryptocurrencies continue to be launched. According to STILT, there are dozens of already exiting cryptocurrencies if not hundreds and many more continue to be launched every other week. Some examples of the known cryptocurrencies are:
- Bitcoin, the most popular crypto coin.
- Ethereum
- Dogecoin
- World Causecoin
- Stellar
- Cardano
- Polygon
- Tether
- Shiba Inu
As any other form of traditional currency, the values of cryptocurrency is also based on scarcity, users demand and the coins utility? Cryptocurrencies also bare the same characteristics, only that cryptocurrency is way more volatile that the traditional currencies.
Scarcity.
When the cryptocurrency’s users trade or invest in A Certain crypto frequently, its demand rises. When more and more people are in need of that specific cryptocurrency, the traders and investors will retain it other than selling it. This creates a shortage of the supply of that cryptocurrency. And of course when the demand is higher that the supply definitely the value of the crypto will shoot higher. This makes some crypto regulate their supply in the market. For example according to Naga-global, bitcoins supply does not exceed 21million coins, this makes its demand high since it’s the most popular coin in the market. This act boots the value of Bitcoin.
Some cryptocurrencies will factor in the ‘burning’ mechanism, where some part of the crypto’s supply is destroyed so as to raise its value.
Project perceived value.
For a project to capture the interest of the market, it has to set in motion a user-friendly software, have profitable partnerships, and emerge successful in their milestones. Generally the progress and viability of a cryptocurrency makes its demand go high. This again revolves around the demand and supply theory.
To find out the true value of a cryptocurrency, that is the market cap index, according to Naga-global, the total amount of coin circulating in the market is multiplied by the price a single coin.
Market cap = Total Circulating Supply * Price of each coin.
For example; If Coin A has 300,000 coins circulating on the market with each one worth 3$, the market cap of the crypto would be 300, 000*3=$900,000.
If Coin B has 200,000 in circulation with each worth $4, the market cap would be 200,000*4= $800,000.
Though the price of Coin B is individually higher, the total value of Coin A appears much more than Coin B. Therefore, the market cap index is way better to indicate the true price of a cryptocurrency.
Influential people and the social media.
Copying what the influential people post on their social media is not a new thing in society. This is the same way influential people affect the value of cryptocurrency, whether they do it intentionally or not. An example is how Elon Musk, The CEO and Founder of SpaceX and Tesla, influenced the value of Doge coin several times following his tweets about Doge coin.
Mining
Mining of cryptocurrencies is very profitable if one understands the venture very well. Mining activities also affect the flow of cryptocurrencies, that is, their supply.
Generally like any other form of currency, the community’s involvement contributes the value of cryptocurrencies. When the utility of a crypto is high, the community will tend to hold on to it. Making its demand go high than its supply, since people want to utilize it they avoid selling it.
