What makes a cryptocurrency grow?

If demand exceeds the quantity available, the price of that cryptocurrency increases. Some cryptocurrencies have a maximum supply and only increase by a fixed amount, such as bitcoin. Other cryptocurrencies, such as Ether, have no supply limitations. The value of cryptocurrency is determined by supply and demand, just like anything else that people want.

If demand increases faster than supply, the price rises. For example, if there is a drought, the price of cereals and agricultural products increases if demand does not change. The same supply-and-demand principle applies to cryptocurrencies. Cryptocurrency gains value when demand increases above supply.

In addition, since there is no physical product or centralized organizing body, it's hard to point to something and say, “Look, that good thing happened, cryptocurrency values will increase now”. So how do cryptocurrencies gain value? Cryptocurrencies can gain value on exchange platforms. Its value increases depending on supply and demand. How do cryptocurrencies gain value? Like any market, the value of cryptocurrencies fluctuates depending on the market's perception of their value at any given time.

These fluctuations may be caused by some of the supply and demand factors mentioned above, or may occur as a result of hidden market factors. Theoretically, if both businesses and consumers were to discover that Bitcoin offers a better shopping experience than using the US dollar, the consumer could convert more of their money from dollars to Bitcoin, while the company would accept more Bitcoin payments. If this were to happen on a large scale, demand for Bitcoin would increase and, in turn, its price in dollars would increase. So, if you had bought a Bitcoin before that increase in demand, in theory, you could sell it for more US dollars than you bought it, making a profit.

As a kind of standard-bearer of the cryptocurrency ecosystem, Bitcoin has benefited from the attention and its prices have remained high. These sudden changes in value can also go against the basic ideas on which the projects for which cryptocurrencies were created are based. There are thousands of different cryptocurrencies, with new projects and tokens being launched every day. Cryptocurrency itself remains unregulated and has earned a reputation for its ecosystem free of borders and regulations.

This means that cryptocurrencies are portable, resistant to inflation, and transparent in their transaction history. In communities that have been underserved by the traditional financial system, some people see cryptocurrencies as a promising foothold. Regulators are increasingly starting to point out that cryptocurrencies should be regulated in a similar way to other securities, such as stocks and bonds. If a governing body changes the rules to disfavor the investment or use of cryptocurrencies, it could cause the price of cryptocurrencies to fall.

The wider adoption of a cryptocurrency as an investment also increases demand and, at the same time, effectively limits circulating supply. However, this view is being rejected; academics, law firms and some of the most important players in the crypto industry have opposed it, arguing that the rules that apply to stocks and bonds, for example, do not apply as broadly to cryptocurrencies. If the underlying idea behind cryptocurrencies doesn't reach its potential, long-term investors may never get the returns they expected. While early Bitcoin users could mine the cryptocurrency using regular computers, the task has become more difficult as the network grew.

Many cryptocurrency projects have not been tested and, in general, blockchain technology has not yet gained wide adoption. Connect the wallet that contains the cryptocurrencies you want to sell and make sure that the exchange you have chosen is compatible with both that wallet and the asset in question. Some of the cryptocurrencies that use the proof of participation are Cardano, Solana and Ethereum (which is in the process of being converted based on a proof of work).

Gertrude Majera
Gertrude Majera

Freelance web aficionado. Subtly charming zombie junkie. Typical coffee maven. Wannabe travel aficionado. Hardcore music lover. Passionate pop culture aficionado.

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