What Are Cryptocurrencies?
Cryptocurrencies refers to digital money, these type of currency unlike the fiat kind of money are not tangible but rather are built based on computer codes, typically examples are Bitcoin, Etheruem, Litecoin, Waves Steem, Steem Dollars e.t.c, there are are lot of cryptocurrencies available right now in and these are fast becoming a means of exchange for goods,services as well as commerce.
Cryptocurrencies just like other form of currencies such as the fiat kind of currencies have value as a result of people think they have value, fiat currencies are backed by some certain instruments such as gold, precious metals and in some cases nothing, but as a result of a people perceive them to be valuable, they become valuable.
What defines Cryptocurrencies prices?
Cryptocurrencies were created to as a medium of exchange as well a means of asset storage without dependence on a central controlling platform such as banks and other third party agent, the price of Cryptocurrencies just like the fiat kind of currencies is dependent on certain instruments and factors which drives and account for it price, these factors are briefly looked at below;
Concept Of Demand And Supply
Now precious metals such as gold, diamond, silver, copper e.t.c get their perceived value because they are limited in supply, therefore with this limited supply and high demand for them the price if such precious metal are perceived to be high, the same analogy of the demand and supply factor also applies to Cryptocurrencies prices, for example STEEM has a total supply of 265,606,780 units, if 500 million people were to adopt STEEM, the 265,606,780 units of STEEM will not spread very far without STEEM having a significant value in price, also the supply becomes constant thus creating limited supply of the cryptocurrency, therefore people will pay more to have the coin.
Energy Usage And Mining Difficulty
Now this is also an important, Cryptocurrencies require energy in form of electricity to be produced, this energy input to securing a blockchain are really intensive in nature, this factor has tremendous effect of the price of cryptocurrencies as a certain amount of energy is required to mine(produce) a particular unit of that cryptocurrency, energy usage in form of electricity goes up as difficulties in mining these Cryptocurrencies increases, thus the higher perceived price of a cryptocurrency points to higher mining difficulty as well as the more secured the blockchain of that cryptocurrency.
Usage Of Cryptocurrency
For any cryptocurrency to be percieved to as being valuable and having a good price it has to have a good usage, if a cryptocurrency can not be used for anything be it a payment or investment option, it will have little or no perceived value, for example Ethereum was designed designed a smart contract platform this is a practical utility, which increased the price of Ethereum over many other alternative cryptocurrencies, also the change in the usage of a cryptocurrency can also affect it perceived value and price.
Media
The media reporting on any cryptocurrency in either a positive, or negative way can have influence on the public perception of such cryptocurrency, and can influence the price. The media can also be used as a means to manipulate the price of a particular cryptocurrency, as many media outlets are owned by a few individuals and it is a major vector for potential price manipulation, as well as reporting on positive and negative aspects of the currency which can cause the price to fluctuate.
In Conclusion
The price of any cryptocurrency all boils down to perception of a majority,
anything has value to someone because they believe it has value, for whatever reason they may have.
So keeping cryptocurrency positive in the perceptions of people is key to maintaining value in any cryptocurrency.
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