How Does Cryptocurrency Gain Value?
Getting involved in the world of cryptocurrency trading is still driven by sentiment and emotions rather than valuation, considering that market prices are speculative, but don’t let your heart cloud your judgment. Cryptocurrencies gain value in the same way as fiat currencies, through demand, which in many cases comes from their usefulness, as well as from trust in the issuer of the currency. Their value grows as the amount of input and traction achieved from its users rises.
Crypto has gained confidence in emerging economies. Bitcoin and other cryptocurrencies are used by ordinary people to avoid strict government capital controls for overseas payments, gaining the position of the fastest growing payment system in the world. Most cryptocurrencies are not governed by banks or governments, so no one controls the price; it’s more about demand and supply. High demand, low supply, open doors for opportunities, this is what we are all looking for. So how do cryptocurrencies gain value?
More Efficient Money
Cryptocurrencies are digital assets that combine cryptography with blockchain technology to enable faster, cheaper, and more secure financial transactions. Decentralised cryptocurrencies do everything that traditional fiat money does, and more, because it is global and not subject to control by a totalitarian government or interference from any third-party supporter.
Cryptocurrencies can be exchanged on a peer-to-peer basis, without intermediation by an external entity. Not only can users transact directly with each other at any time and from anywhere, but they do so autonomously, without the need to rely on a central bank or counterparty, giving them full control of their money.
The value of cryptocurrency is that they store a constant value and act as a medium of exchange for goods and services globally, not just locally.
Transparency, an added value
Imagine walking into your local bank and asking to see the bank’s entire ledger: the complete record of all mortgages, debt obligations, transactions, etc. since the bank opened its doors. Your request would be denied. But with blockchain technology, any transaction is available for anyone to see at any time, as every transaction is recorded, authenticated, and shared across a vast network of devices. The digital ledger provides a transparent, traceable, and visible trail for all. In this way, there is no need for users to rely on a central bank or authority to complete a transaction, users are in full control of their money and how they handle it.
Regulations and Governments
While popular fintech appshave helped to make some traditional financial services simpler, third parties are still involved, making it impossible for users to make true peer-to-peer (P2P) transactions. People sending money across borders are not only dependent on third parties such as banks and banking services but are also forced to pay high fees for a service that is by far too slow at present.
Globally, almost 7% of financial transactions have fees applied to them. A large part of these fees is for intermediaries involved in money transfers. In addition, cross-border exchanges take a long time, with some transactions taking days to complete. When the cost of exchanging money becomes a burden on the value of the currency, no one wins.
Only decentralised cryptocurrencies can offer the unbanked access to many of the same opportunities.
More and more companies are accepting cryptocurrencies as a form of payment. Of course, this depends on the country you live in and how are cryptocurrencies accepted. Other companies have also created debit cards where you can use your crypto and pay in physical shops as well as virtual ones. There are also special ATMs where you can exchange your virtual currencies to physical money to but products.
In recent years, there have been major high-profile cryptocurrency hacks, hundreds of millions of dollars have been stolen and the lack of security created a trust barrier among some investors. A cryptocurrency is a digital asset that uses cryptographic encryption to guarantee its ownership and ensure the integrity of transactions, and to control the creation of additional units or making copies.
Cryptocurrencies are created using blockchain technology, which describes the way in which transactions are recorded in blocks and timestamped. It is a fairly complex technical process, but the result is a digital record of cryptocurrency transactions that is difficult for hackers to manipulate.
In addition, transactions require a two-factor authentication process. For example, you may be asked to enter a username and password to initiate a transaction. You may then need to enter an authentication code that is sent as a text message to your mobile phone.
Supply and demand
FOMO (Fear of Missing Out) is a very common term among cryptocurrency investors, which describes the period when prices are volatile and investors panic for profit or loss. In the case of cryptocurrencies, as there is usually a shortage of them and therefore much more demand than supply, they rise in value fairly regularly, despite their ups and downs.
Cryptocurrencies may be the most important thing to happen to money since the gold standard. While it is true that there are still many people who are wary of cryptocurrencies and do not fully understand how cryptocurrencies maintain their value, others who have followed the progress of cryptocurrencies since Bitcoin was first mined in 2009 understand their relevance and benefits and see cryptosas even better than traditional money. The most promising digital currencies are disrupting the global financial services space because they offer financial freedom for all thanks to decentralisation.
However, let’s not forget that the cryptocurrency market is volatile. You will see drastic price fluctuations, so if your investment portfolio or mental well-being can’t handle it, cryptocurrencies are probably not right for you. Investing in something new comes with challenges, so be prepared. If you plan to take part in the crypto environment, do your research, and invest moderately to get started. Investing in this innovative currency can turn out to be a very profitable opportunity if you have the idea of its values.