Just like other currencies, virtual currencies are also governed by various factors and therefore have value. On the Instant Connect site, you have the opportunity to learn more about this if you want to invest in cryptocurrency trading.
Indeed, virtual currencies are designed to be units of exchange capable of storing assets, without having to resort to central banks.
Here are the different characteristics that influence the cost of a cryptocurrency:
Supply and demand
In general, precious metals acquire more value over time based on their usefulness. Their prices evolve according to supply and demand which are considered economic factors. When it comes to cryptocurrencies, you should understand that many of them are considered assets in some countries.
Taking Bitcoin as an example, it should be noted that it has up to 21 million units. These are divisible 100 million times. If we consider that at some point 1 billion people will decide to adopt it on the planet, the 21 million units will not yet be able to spread much if the cost of the coin is not significant.
Apart from this aspect, it must also be said that the offer is proposed at a constant rate and cannot be modified due to co-awareness measures. Therefore, the supply becomes a limited element, which will make people pay even more to own the currency.
Public perception of the value of a cryptocurrency
Public perception of the value of a cryptocurrency is one of the key factors that can greatly influence the cost of that currency. Continuing with the case of Bitcoin, you will notice that this currency is by far the most popular on the market. This is thanks to the notoriety it enjoys among the general public and above all among successful investors.
It is therefore easy to conclude that the positive opinion of the public towards a cryptocurrency contributes to an increase in demand. However, the greater the demand, the more supply is reduced and the more the currency fluctuates to the happiness of investors.
Legal and government issues
Legal and governmental opinions carry considerable weight in matters relating to the price of a cryptocurrency. In case the government is quite oppressive with the tax laws, it can reduce the investment rate. This could cause users to change their minds about the price and value of a cryptocurrency.
Other factors that can intervene in the variation of the price of a crypto
The difficulty level of the blockchain can also be a major factor causing the price of a cryptocurrency to fluctuate. Before embarking on investments in the virtual currency sector, you should pay attention to this detail. In addition to this factor, also pay attention to the following:
● the energy to protect the blockchain;
● ease of use and storage of the currency;
● media opinion;
● the number of investors around the currency;
● market dilution;
● innovation represented by money, etc.;
Cryptocurrencies are very popular today, but they can easily cause you to lose money if you don’t check their fluctuation rates. It’s up to you to know how to evaluate each of these factors before embarking on the adventure.