Cryptocurrencies, since their inception with Bitcoin in 2009, have waded through troubled waters and survived massive scams to emerge as the “next big thing” in fintech and the overall global financial order. With little or no governmental support behind them, the value and acceptability of cryptocurrencies have reached a new height since COVID-19 struck the financial and commercial arena. This article relates to the factors that make cryptocurrencies so resilient despite dispiriting regulations and what measures determine the price of crypto coins/tokens.
Cryptocurrencies are privately launched digital currencies whose transactions are recorded and safeguarded on a public ledger, commonly referred to as Blockchain. The deployment of public ledgers leaves no need for additional third-party transparency and trustworthiness. The value of a cryptocurrency, for the most part, is affected by the demand and supply of its coin. For example, Bitcoin is tapped at 21 million coins which makes it somewhat rare and, by the looks of things, extremely expensive. Any decrease in crypto’s value is virtually non-existent since its demand and supply is fixed and disinclined to inflation. Mass and social media trends also factor in when the future price of a cryptocurrency is concerned. Cryptocurrency investors rely heavily on what they find of social media about the value and other dynamics of any cryptocurrency. Companies exploit this influential medium and create a competitive reputation of their coins/tokens through attractive marketing campaigns and sometimes, promise of huge discounts from loyalty programs. This trend will only grow as investors now tend to be younger and hence more indulged in social media for their investment decisions.
Partnerships with globally-reputed corporations and companies also contribute in tickling the value of cryptocurrency. The old adage ‘two heads are better than one’ rings truer in the matter of crypto value. Ever since Google, Tesla, Facebook and other Fortune 100 companies backed and invested in cryptocurrencies, their value has surged exponentially.
Another aspect of crypto valuation rests at the age old bear-bull market kinetics. A market turns “bearish” when there is a considerable downtrend over a relatively short period. Essentially, it’s when prices start to rapidly drop. Bullish trend is opposite to it, as it is marked by upsurge in price. Both trends can be hugely profitable for investors only if handled with prudish strategy-building. As any good investment, cryptocurrency investment has its inherent risks. To subdue these risks, it is imperative to carry out necessary homework. Excessive selling or buying of crypto coins can significantly alter its value. According to pundits, a week is a long time in crypto investment and if handled properly, can churn out massive profits amid all market fluctuations.
Lastly, the state of regulation also plays its part in determining the value of cryptocurrencies. Since cryptocurrency’s uptick is still in its infancy, its hard to compute the true effect of regulation on its value. But one thing is sure that regulation can deem it a safer investment. A system less prone to scams and frauds and more receptive towards record and registration has always thrived, as the history has abundantly shown. It is more likely than with increased regulation, crypto will reach a bigger mass of investors and hence increase in value.
In conclusion, it can be safely held that cryptocurrencies have a long way to go before becoming an attractive investment. Given its recent rise, the value of cryptocurrencies has become easier to determine in contrast to the murky days of secrecy and confidentiality surrounding cryptocurrencies.