If you are thinking about the derivatives of cryptocurrency, you must know that the value of cryptocurrencies keeps on changing. In fact, it sometimes goes extremely up and at times, extremely low. It can be termed as notoriously volatile as the increase or decrease in price is quite common by 5% to 10% in a span of a few hours. Especially, the smaller cryptocurrency shows wider price volatility. Follow Trade Crypto Superstar to get regular updates on the Bitcoin world.
Everyone is aware of the latest buzz – Cryptocurrency. Even if not trading or not interested in knowing about the crypto world, you will come across many news bulletins on the topic.
Let’s understand the determination of the value of cryptocurrency
When the number of investors increases, the involvement in cryptocurrency increases, and it determines the value of trading. Majorly, elements like demand, scarcity, utility, etc. define the scale of purchasing and selling. Cryptocurrency is available as a digital coin that is introduced by one or more private companies under blockchain technology.
You might keep on thinking of the volatility of the subject before entering it. But, once you are ready to dive into this world, you will gradually understand the elements that are responsible for the extreme volatile situation of the market. A few crypto elements are highlighted below:
- Understand The Node Count:
Yes, node count is an important element that helps in determining the value of cryptocurrency. It is the exact count of the number of active wallets currently existing in the same network. Obtaining this value is not difficult as any person interested can simply get it through a quick Google search. A strong community is the one with a high node count and it further takes the market away from the chances of crisis.
- Trade on multiple exchanges:
A user can trade Bitcoin on different cryptocurrency exchanges as the most popular ones will always be listed. If you check out the smaller valued cryptos, they might not be available on multiple exchanges making it difficult for the investor to trade swiftly. You might have to pay a higher amount if you want to trade such cryptos as the wallet provider would charge fees for the same. Always keep in mind that the spread of the exchange, and the trade value of the cryptocurrency might fluctuate.
- Change in value of scarce cryptocurrency:
The digital coins are limited as the private companies are only allowed to supply a specific number. Now, with the change in the demand, there would be a point when the cryptocurrency has to face scarcity. In such a situation, the value of cryptocurrencies changes notoriously. There cannot be the same demand and supply. The coin supply goes up and down always and it is the reason for the increase or decrease of the value of your Bitcoin.
- Enhanced utility:
When the utility of the Bitcoin is enhanced, is when the value would is higher. Crypto coins are generated under blockchain technology so enhancing the utility is possible only when big and small organizations start accepting it as a form of payment.
- Greater competition:
Several coins have been launched since the time of the cryptocurrency inception. These digital coins are increasing every day making it versatile for the investor to expand their portfolio while the increase in competition leads to an increase in value. You might have heard of soccer team coins, meme coins, celebrity coins, etc. which are limited but are a way to build a strong user base.
- Government regulations:
The main distinguishing characteristic of cryptocurrency is that it does not have to abide by a specific set of rules. The private companies that launch new digital coins usually have some project-based rules depending on the community that uses them.
To conclude, it can be said that cryptocurrencies like Bitcoin, Ether, etc. face volatility due to several factors. You cannot predict it every time the value changes but after research, it can be understood that a simple change in the economic, financial, political, or global world might impact the money that you have invested in cryptocurrency. Always get guidance from financial experts to safeguard each transaction in the crypto world.