How Does Cryptocurrency Gain Value?

An inevitable doubt in a new crypto investor’s mind is about cryptocurrency gaining value. How does a crypto increase its value?

Cryptocurrency is not very old; it began in 2009. Cryptos, are now undoubtedly a universal phenomenon. It is in the process of slowly becoming a part of major industries, even top enterprises have shown willingness to accept crypto as a feasible payment option. It can be said that the future would only strengthen the abilities of digital currencies.

The monetary system associated with crypto is the digital currency’s most rewarding feature. Crypto is decentralized in nature and is without any control or regulations by the government. However, the market tends to be highly unregulated, and as a result, crypto prices can witness abrupt and extreme variations. Also, conventional financial methods fail to match crypto when it comes to lack of transaction fees, unknown nature, and ease of transactions.

Unlike traditional currencies, the continuous interaction between sellers and buyers is what determines or increases the value of crypto. To put it other way, there is an increase in value of crypto that happens through perceptible components associated with these digital currencies.

As cryptocurrency gets traded on an exchange, a specific price is set to the market. However, it is not the exchange that sets the crypto prices. In other words, the monetary value of a crypto happens through supply and demand. Supply refers to the availability, whereas demand gives a direct reference to those who deserve it.

Crypto increases its value with an increase in traction and input received through an increase in its users. The future of crypto is linked directly to the usage and trust of its customer base. The intrinsic value held by millions of customers who are either potential crypto owners or are existing owners is what keeps its value high. The more it is utilized, the more value is generated for a crypto.

Going the traditional way

A fundamental way of increasing value of crypto is to buy them when available at a low price and resell during a surge in prices.

Yet another way to make profits from cryptocurrencies is to purchase and hold the digital currency for dividends. Here, what happens is the cryptocurrency bought would be in circulation and the buyer would receive payment for holding it. The need for purchasing the crypto is avoided when an investor decides to use crypto for dividends.

Insufficiency

Scarcity of cryptocurrencies is another factor that assumes significance here. Ideally, the demand for a crypto should excel its supply to make it highly valuable. As a perfect example, the finite supply of bitcoin is never more than 21 million coins. Market cap is the direct indicator of the market value of the coin. The overall circulating supply is multiplied by the individual coin price to arrive at the final market cap index.

The apparent project value

The value of any crypto is reliant on the development and practicability of the crypto project which is on a continuous process of development. Any crypto project, as it progresses tends to become more valuable in the crypto market.