What gives cryptocurrency value? Perhaps a question that is ultimately leading to what is the future of cryptocurrency, and the one that most of us are interested in knowing about? Is it a large number of people looking towards cryptocurrency as an investment source that is giving it its value, or is it the comparative position of cryptocurrency against other instruments like gold and silver that is generating a value for it? This is actually a tough one to answer as there are a number of factors, and then a number of permutations and combinations in the way these factors interact with one another to give cryptocurrency an end value. So let us dive deeper into what gives cryptocurrency value.
What Gives Crytpocurrency Value
One approach to understand what gives cryptocurrency value is to understand the determinants that control the sale or purchase of the tokens. Here, we list some of the most crucial ones in this regard.
Supply and Demand: Cryptocurrency can be generated slowly and that too not endlessly. So the demand and supply of some particular crypto token at a given point in time is something that easily controls its value. The more the supply, the less is the perceived value, and the more the demand, the more is the perceived value. Mark that we are not talking of value as the cost tag attached to the token, we are talking of value as the perceived importance of it in the minds of the investors, and the perceived future value.
Utility: Next comes utility. A token is said to carry utility if it can be used for something. And a token is perceived to carry value if it has utility. This will of-course increase the demand too, but utility is a stand- alone determinant that can add value by itself to some cryptocurrency token.
Collaborations: And now let us talk of collaborations and partnerships as the next big thing that adds value to any crypto token. If a project is associated with some brand name of repute, like Facebook launched Libra, it is considered to be of higher value in the minds of the crypto investors. And that is natural.
Incentives: Incentives act as lucrative into alluring investors to buy a particular token, thus increasing and adding on to the value of the token. Some tokens have so that if you hold their coins above a certain threshold, and then you run the node, you get rewarded. Now this is an obvious reason for traders to hold a coin.
Liquidity: The wider user base of some particular token gets an added value to the token. This is for the simple reason that larger the spread, the easier it becomes to buy or sell that token in the market. Kind of liquidity to the token. And additional value in turn. Perhaps one of the major determinants as to what gives cryptocurrency value, and perhaps why Bitcoin is the market leader at the moment.
So what gives cryptocurrency value is a complicated and an ever changing dimension. It is thus better to take the advice and consultation of crypto experts like executium.com, and then play accordingly.