Hello
So, for a bit, I thought of sharing my knowledge here (even if I'm new here) so as to carry the beginners along. This might come in handy for most of us.
So, I'll be going down to the very BASIC.
What's cryptocurrency?
It's a decentralized encrypted exchange unit.
Right.
It's transactions are visible through a decentralized ledger (Blockchain)
How can you tell which cryptocurrency will go up ?
Truth is, there's no clear cut out way. But there are laws that if followed, you can make predictions. Good ones.
The law of demand and supply can help you understand how the prices of crypto changes.
Demand: The higher the demand, the higher the price. Quite simple, crypto platforms releasing better utilities to attract users leads to value rise.
Supply: The more the units of crypto, the less valuable they are in units. If a cryptocurrency is readily available in bulk to the public, the value drops.
Scarcity is value😅
Look at it this way; bywhen supply grows faster than demand, the currency falls, and when demand grows faster than supply the value appreciates.
So, I'll talk later on about ways to make predictions on cryptocurrency rise. Apply the rules and make accurate predictions.
Cryptocurrencies gain value through a complex interplay of various factors, encompassing both intrinsic and extrinsic elements. Firstly, the scarcity mechanism embedded in many cryptocurrencies, such as Bitcoin's capped supply of 21 million coins, mirrors the scarcity dynamics of precious metals like gold, thus imbuing them with intrinsic value. This fixed supply, coupled with increasing demand driven by factors like adoption, technological advancements, regulatory developments, and geopolitical uncertainties, can lead to appreciation in value over time.
Moreover, network effects play a pivotal role, as the utility and adoption of a cryptocurrency increase with the size of its network. As more individuals and institutions utilize a cryptocurrency for transactions, investments, or as a store of value, its network effect strengthens, fostering greater trust and liquidity, consequently bolstering its value proposition.
Additionally, market sentiment, influenced by factors ranging from media coverage, investor speculation, and macroeconomic trends, can significantly impact cryptocurrency prices in the short term. Furthermore, technological innovations and improvements in the underlying blockchain technology, such as scalability solutions or enhanced security measures, can enhance the utility and desirability of a cryptocurrency, thereby positively affecting its value.
Lastly, regulatory developments and institutional involvement also exert a substantial influence on cryptocurrency valuations. Clarity and favorable regulatory frameworks can alleviate concerns regarding legality and foster mainstream acceptance, attracting institutional investors and paving the way for increased adoption, liquidity, and consequently, valuation appreciation.
In essence, the value of a cryptocurrency is a multifaceted phenomenon, influenced by a combination of scarcity, utility, network effects, market sentiment, technological advancements, regulatory landscape, and institutional involvement. Understanding these dynamics is essential for investors and enthusiasts alike in comprehending the intricacies of cryptocurrency valuation.