How does cryptocurrency gain value?

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WRITTEN BY Abel Stokes 44 views date-icon 2024-07-11 06:31:44

One of the most disruptive aspects of cryptocurrencies is that they are decentralized finance. This means that they have no physical collateral and no centralized authority to regulate them, as is the case with fiat currencies. This leads to a different pricing structure.

To understand how cryptocurrencies gain value, you need to know what they are and how the market for these assets works. It is a digital ecosystem where cryptocurrencies are bought, sold and exchanged. It is based on blockchain technology. It allows transactions to be recorded securely and transparently in a decentralized network.

To participate in the cryptocurrency market, there are exchange platforms, also known as exchanges, that allow you to exchange fiat currencies such as ARS for various cryptocurrencies. In addition to buying and selling assets, you can participate in this market by mining. This is a process that allows you to validate and verify cryptocurrency transactions as well as create new currencies.

What is the real value of cryptocurrency?

It is also necessary to know the concept of "real value". This is the price of a good, service or security on the market, taking into account all the tangible and intangible elements that affect it. In the case of fiat money, which is backed by a centralized authority, the real value is set by political and monetary decisions and factors such as inflation or market demand.

On the other hand, the real value of cryptocurrency is set based on trust and perception of its utility. It can vary and depend on various factors.

6 aspects that affect the value of cryptocurrency

Acceptance

The level of acceptance of a cryptocurrency is a formative aspect of its value. Not only does it mean that more people and companies are using cryptocurrency, but it also indicates that it has a practical function and reflects its integration into the economy.

In addition, it increases the liquidity of the asset, allowing for more efficient transactions and easier conversion to fiat money. On the other hand, the adoption of cryptocurrency stimulates the growth and development of its ecosystem.

Supply and demand

In the absence of regulatory bodies, decentralized finance creates its value based on supply and demand. For example, if the number of units of a cryptocurrency is limited and the demand for it increases, its value is likely to increase dramatically due to the perceived scarcity.

Utilization

Another aspect that affects the value of a cryptocurrency is its practical application. If an asset utilizes innovative technology and offers various features to online users, its value is likely to be higher. This is the case for cryptocurrencies that facilitate fast and secure transactions, or those that enable smart contracts, for example.

Security

Another aspect that plays a crucial role in the value of a cryptocurrency is the security and trust that the asset generates. For example, if a cryptocurrency has a secure infrastructure, can withstand cyberattacks and prove its reliability over time, its value is likely to be higher.

Community

The concept of community is crucial to decentralized finance, and thus to cryptocurrencies. The ecosystems of these assets are maintained by their participants and therefore have a strong influence on their value. An active community of developers and users helps to ensure that the technology is constantly growing and continuous improvements are implemented. This increases confidence in the currency as well as its value.

External factors

Finally, another factor that can affect the value of a cryptocurrency is external events, namely those that are independent of the asset but have an impact on it. Such factors can be changes in legislation, important news, or mass adoption of the asset. For example, the announcement of a strategic partnership with a major organization can increase the value of an asset.  

How to track the value of cryptocurrencies?

To find out the value of a cryptocurrency, you can use the trading tools of different exchanges. A comprehensive cryptocurrency solution allows you to trade assets and also offers resources to analyze the market.

The Bottom Line

Cryptocurrency prices aren't set by a bank, but by people buying and selling (supply and demand). The more people trust and use a cryptocurrency (acceptance), the more valuable it becomes. Security, special features (like smart contracts), and even news headlines can also affect the price. Use trading tools to track cryptocurrency values and stay informed!

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