Economy

Where Do Cryptocurrencies Get Their Value – 2021 Review

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Written by Quentin Hack

Even though most people have already heard about cryptocurrencies, especially some of the most popular units like Bitcoin, Dogecoin, Ether, and more, most of them are still not familiar with the processes that allow these digital currencies to exist and make them so useful. Cryptocurrencies are using blockchain technology, which is a complex set of codes that provides the system with high security.

Therefore, it is not a surprise that many other industries are planning to implement this system into their processes. When it comes to digital currencies, we have to mention that one of the main reasons for their popularity is the fact that they are decentralized which means that standard monetary activities related to official institutions cannot affect them in any way. On the other hand, coins and tokens are still a great subject of fluctuation on the market, and that is the reason why so many people are interested in investing in these assets.

However, being successful as a trader on the market of cryptocurrencies will require a lot of analyses, and even some risky moves as well. The best example is Bitcoin that had many ups and downs since it was introduced more than 10 years ago. The price of this coin was under $5,000 one year ago, while it managed to reach new records at the start of 2021, with a value of around $36,000. Therefore, it can be crucial to learn about all of the factors that can influence the value of digital currencies and compare their prices more often. You can visit CryptoPrijzen if you want to find out more about the prices of cryptocurrencies in various online exchanges. Furthermore, we are going to introduce you to the main factors that determine the price of blockchain-based currencies.

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Usability and Popularity

There are over 2,000 cryptocurrencies available on the market, but not all of them have the potential to become stable and popular on the market. Also, some of these units can provide advanced features like smart contracts or resources for better cloud computing. The speed and limit of transactions are also very important. In that matter, you will have to research more and be sure that the selected assets have the potential to remain stable or become more valuable over time. Currently, the most popular coins and tokens are Litecoin, Ethereum, XRP, BTC, and several others. You can already use most of them for standard payments, while some less popular units are only available for trading.

Incentives

While there are many types of virtual assets that people only choose to sell after a short time since they are highly volatile. On the other hand, several units have a chance to become a part of the standard monetary system, which means that holding them might bring you much higher profit in the future. For example, some studies say how the price of Bitcoin might reach the price of over $100,000. On the other hand, cryptos like Ethereum or NEO are allowing people to create altcoins over their blockchain systems, which increased their value and popularity.

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Demand and Supply

Like with most other types of assets that you can trade with on the market, the laws of supply and demand can be crucial for cryptocurrencies as well. When the demand for some coin or a token is higher than the supply, the value will become higher. There are also other factors related to demand and supply, like the speed and volume of mining and the projected limit of coins that will be available when the process of mining is over.

Geopolitical Situation and Regulations

Besides the standard trading process that makes the crypto market to be similar to the stock market, you also have to consider some factors like politics and official regulations. For example, if some of the developed countries decide to penalize another country with a strong economy like is currently the case between the United States and China, there is a high chance that people who have a business in penalized countries will become interested in finding the way to protect their assets from inflation, and investing in cryptocurrencies is one of the most effective methods of protection.

On the other side, in case that countries with strong economies decide to make some digital asset illegal, that unit will most likely become worthless. Also, the fact that Japan, European countries, the United States, and other highly developed countries have a plan to implement the blockchain system into their official economic processes have a huge influence on the prices on the crypto market.

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Technical Features That Makes Them Valuable

When compared to the standard payment methods and banking system, digital currencies offer people the ability to make faster and anonymous transactions that cannot be intercepted in any way. Blockchain technology is using an advanced system of blocks of codes that makes e-wallets highly secured. On the other hand, there were some cases of cyber-attacks where thieves managed to steal millions of dollars in cryptocurrencies, but all of these cases are related to online platforms that you can use to trade. In that matter, you should avoid storing your assets on online platforms. The safest method is offline electronic wallet.

Conclusion

The blockchain-based currencies represent the revolution that is affecting the market in various ways. Since there is a trend in the whole world where people are becoming more interested in using credit cards instead of cash, the potential of e-wallets is that they represent a cheaper alternative that provides users with features like high security, fast transactions, and the potential to make a profit.

As you can see, there are many factors that you will have to consider before deciding on which type of asset to invest in. Under the right circumstances and with the proper selection of coins and tokens, you might be able to reach financial stability by investing in the market of cryptocurrencies. However, you should take all of the predictions with a dose of the reserve since it is very hard to create accurate predictions because of the constant changes in the market and various influences.

About the author

Quentin Hack