Cryptocurrencies are the latest'big thing' in the electronic world and have been known as being a part of the fiscal system. Actually, fans have tagged it 'the revolution of money'.

In clear conditions, cryptocurrencies are decentralized digital assets which can be exchanged between users without the need for a central authority, the majority of which being created via specific computation techniques known as'mining'.

The acceptance of monies, such as the US Dollar, Great British Pound and the Euro, as legal tender is since they have been issued with a central bank; electronic monies, however, such as cryptocurrencies, aren't reliant on the trust and confidence of the public on the issuer. Therefore, several factors determine its worth.

Factors that Determine the Value of Cryptocurrencies

Principles of Free Market Economy (Mainly Supply and Demand)

Supply and demand is a major determinant of the value of anything of value, such as cryptocurrencies. That is because more people are eager to buy a cryptocurrency, and others are willing to sell, the purchase price of that specific cryptocurrency increases, and vice versa.

Mass Adoption

Mass adoption of any cryptocurrency can take its price to the moon. This is due to a lot of cryptocurrencies having their distribution capped in a particular limit also, according to economic principles, an increase in demand with no corresponding growth in supply will cause a price increase of that particular commodity.

A number of cryptocurrencies have spent more funds to make sure their mass adoption, together with some focusing on the applicability of their cryptocurrency to pressing personal life problems, in addition to crucial day-to-day scenarios, with the intention of making them indispensable in everyday life.

Fiat Inflation

If a fiat money, like the USD or GBP, becomes inflated, its price rises and its purchasing power drops. This will then cause cryptocurrencies (let's use Bitcoin as an example) to increase with regard to that fiat. The result is that you will have the ability to obtain more of the fiat with each bitcoin. In reality, this scenario has been one of the major causes of Bitcoin's cost increase.

Scams and Cyber Attack History

Scams and hacks will also be core aspects impacting the value of cryptocurrencies, as they are known to cause wild swings in valuations. In some cases, the team backing a cryptocurrency might be the scammers; they will pump the price of this cryptocurrency to attract unsuspecting individuals and when their hard-earned cash is invested, the cost is shortened by the natives, who then disappear without a trace.