Digital Assets live outside of the normal reaches of institutions and governements. With so many options.. how do we know what to do when it comes to finding the fundamental value behind cryptocurrencies?
Not all cryptos have fundamental value like HIVE and LEO! Let's dive in!
What makes crypto valuable besides price?
Cryptocurrency is not tied to any underlying asset, but it does have value given its ability to be quickly and easily transferred globally. Cryptocurrency is free from regulation which allows for a global transaction. Cryptocurrencies are not constrained by politics or borders therefore facilitating trade. The access, anonymity, and interoperability of cryptocurrency plays an important role in it's value to the world.
How does underlying value relate to physical value?
Cryptocurrencies are traded at high volumes on exchanges all over the world thus causing them to have a high demand globally and their value can be very volatile. Cryptocurrency is decentralized, the blockchain technology that records transactions in a public ledger cannot be altered after a transaction has been recorded. Cryptocurrencies are mined with computers through solving complex algorithms but, can also be purchased on an exchange using conventional currencies.
How is the price of crypto determined?
Cryptocurrency is volatile because of its young age and limited use. They are traded in a range bound market, the majority of the trading volume happens through buying and selling it on an exchange. Cryptocurrency has been able to maintain or grow in price due to increasing demand from new users looking to transact with them for goods and services. Cryptocurrencies are only valuable because people think they are valuable just like currencies in some countries have no intrinsic value but what you can buy with them does.
What are the factors that contribute to cryptocurrency price volatility?
Crypto has underlying value because of its use case, blockchain technology, decentralization, interoperability. Cryptocurrency price is determined by supply and demand which also determines whether they will be traded at a premium or discount. Cryptocurrenices were born out of an innovative invention, blockchain which has disrupted several different industries.
Cryptocurrency is increasing in use every day, more and more companies are accepting Cryptocurrency as a form of payment. Cryptocurrencies are probably here to stay and will continue increasing in price as long as they keep increasing in use. Crypto may not be immune from market-driven volatility, but certainly has underlying value for those who are willing to transact with it.
