Cryptocurrency is a decentralized virtual currency, i.e. independent of traditional banks. Nevertheless, it does not completely escape the phenomenon of fluctuations. Several parameters impact the value of a cryptocurrency at time T.
The value of a cryptocurrency is often a function of the technology used. A cryptocurrency that gains value is a digital currency powered by recent and innovative technology. This currency gains in visibility and value and becomes the rare pearl sought by all investors. The evolution of a cryptocurrency depends essentially on the importance that users attribute to it. In practice, the value of a digital coin is determined by:
In addition, a cryptocurrency capable of developing without an intermediary that’s why it is expected to have much brighter future. Take for example Bitcoin, which transactions can be done without an intermediary.
The value of a cryptocurrency also varies depending on the number of users who are interested in it. A digital currency immediately increases in value when it is solicited by a very large number of investors. In practice, this is a sign that this currency is powered by quality technology. The more popular a cryptocurrency is, the more it gains in value. For example, the competitive value of Bitcoin is tied to its popularity. This is the reason why investors are flocking to this crypto currency to trade.
The value of a cryptocurrency increases automatically with user trust. The more investors have confidence, the more a digital currency get stabilised and its reliability rate increases. In the same way as for a traditional currency (euro or dollar), the virtual currencies of reference (Bitcoin, Ethereum) are those which aspire the most confidence to users.
The rarity of a cryptocurrency testifies to its value. A digital currency is rare when it has been produced in a limited number of copies. This is particularly the case of Bitcoin which holds the world record in terms of value, thanks to its very limited stock. Unlike Ethereum, which is produced in unlimited numbers, Bitcoin has only 21 million units in circulation, for a value of around $30,000.
As with traditional currencies, the global economic situation directly affects the general value of cryptocurrencies. When the global economy stabilizes, cryptocurrencies gain in value. And conversely, cryptocurrency can quickly devalue if the demand drops. This is why some platforms minimize the procedures related to the purchase of a cryptocurrency.