There are more and more means of investment and among these is cryptocurrency. This virtual currency particularly attracts attention due to its fluctuations. It is important to remember from the outset that there are no institutions that control the value of this decentralized currency which, in fact, varies depending on several factors. This is how a cryptocurrency increases in value.
How do you define a cryptocurrency?
A cryptocurrency is also called cryptographic currency because it is based on cryptography to secure transactions in order to counter the supervision of central banks. It is a digital payment method exclusively used on the web.
Some US metropolises routinely use this intangible currency, but clearly and resolutely anchored in the reality of transactions in services and goods. Its rooting in uses is due to the progression of its value on the financial market. What are the factors that make a cryptocurrency increases in value ?
Increase in value of a cryptocurrency: the economic factor
A cryptocurrency fluctuates depending on the economic context in general. A generally good economic situation positively influences the good health of a cryptocurrency. For what ? Because it is the economic climate that determines the dynamism of investors.
Furthermore, the stock markets are undoubtedly linked to the cryptocurrency market. That said, many other factors that have absolutely nothing to do with economics can determine how a cryptocurrency increases in value.
Technology can influence the value of a cryptocurrency
To assess the relevance of a cryptocurrency, it is essential to understand the project as a whole. What is the potential of the team or group leading the cryptocurrency project? Knowing the aims of the cryptocurrency in question is decisive. What are the possible uses that this cryptocurrency can allow?
It is not uncommon to hear that the value of a cryptocurrency depends heavily on its technology. It must be said, in fact, that cryptocurrency increases in value when it is based on solid, scalable and innovative technology. If bitcoin has gained so much value, it is mainly because it facilitates transactions so that we do not have to deal with any intermediary. This is greatly appreciated by the public.
Credibility as a factor favoring the rise in the value of a cryptocurrency
Why are the euro and the dollar strong currencies? It is the confidence that people have in these currencies that gives them the status of a sure value. Many convincing investments only testify to what investors find reliable, a currency.
A cryptocurrency increases in value as the number of users grows. Therefore, virtual currency circulates well and energizes the financial market. We simply deduce that the credibility of a cryptocurrency is a crucial element for its evolution.
To reassure yourself of the reliability of a virtual currency, you just need to look at the number of investors who are interested in it. A large number of users means that:
- investors have great confidence in digital currency;
- the technology on which cryptocurrency is based has enjoyed strong support.
The popularity of a digital currency is therefore a true indicator of its value. Bitcoin is the crypto with the highest value on the market and its blockchain is necessarily the best known.
The status of investors gives weight to a cryptocurrency
When banks invest in a cryptocurrency, as do institutional investors, there is no doubt that the value of this digital currency will increase in importance.
A cryptocurrency that goes beyond the purchase-sale cliché and which is also at the service of insurance, finance, health, real estate… is sure to rally institutions to its cause if the project is well put together .
Scarcity: a factor that causes a cryptocurrency to increase enormously in value
In life, everything that is rare gains importance and this is valid for virtual currencies. The number of bitcoins circulating is limited to 21 million. The more time passes, the more its rarity will worsen and its value will rise. The creation of the next bicoins is projected for the year 2100.
As we can see, a cryptocurrency increases in value depending on several factors. It may also lose importance for other reasons. This is why it is prudent not to invest in just one cryptocurrency.