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Author : Bitconnect
Bitcoin was the first mainstream well designed cryptocurrency, was released as open source and bought many innovations on its own and new innovations are still being developed for Bitcoin. It holds the #1 spot on cryptocurrency price at https://coinmarketcap.com/ at present. Litecoin. Litecoin was the development of a ‘silver to Bitcoin gold’ and was designed to be used for smaller payments with a faster transaction confirmation time and as a result, higher network capacity due to more blocks being produced. This held Litecoin at the #2 spot for a long time, although Ether took this spot at present in 2016. Ether. Ether had innovation and was not designed as a ‘currency’ per se but is often used as such. It used its own POW hashing algorithms and system rules, and was designed as a token to use the Ether network to execute computer code such as in a smart contract in a way where it was verifiable what was executed, due to the distributed ledger which is the Ether blockchain. at https://etherchain.org/. Unobtanium. Unobtanium at http://unobtanium.uno/ had a fair launch and was designed as a cryptocurrency which is ‘rare’ to be used as a store of value, with a capped supply of 250,000 coins. This was an innovation in its own right, being merge mined with Bitcoin by some pools also give this blockchain high security. Alas, the price never went anywhere close to Bitcoin and was surpassed by Ether and even Litecoin in some cases. This could change in the future, however if the coin gained more exposure.
Innovation is not always enough on its own, as shown by the Unobtanium coin; but innovation can be a driving factor if it brings something unique with high utility to the table. This factor has been mocked also, by the development of some cryptocurrencies being mocked the fact many other cryptocurrencies just rip off the Bitcoin source code and many new coins a day are coming out with this problem. An example of community members reacting to this by mocking is here at https://bitcointalk.org/index.php?topic=307419.0. Confidence in traditional systems. When confidence in the traditional systems increase, such as the price of the U.S dollar going up, this can cause some people to go back to storing assets using traditional currency. This can have an effect on the price of Bitcoin in particular and in turn the other cryptocurrencies, Bitcoin being the de facto reserve currency of the bitcoin world. Legal and governmental issues. Legal and governmental issues can influence the price, if a government beings being oppressive with tax or asset laws, it can be trivial to hide assets in a cryptocurrency, this perceived value by a country of investors can cause changes in price. Legal moves which are positive for a cryptocurrency such as making them official as currency can have a positive effect, while a country banning it could have a negative effect. In the case of Ecuador, at https://www.cryptocoinsnews.com/ecuador-bans-bitcoin-favor-own-national-cryptocurrency/ they banned the Currency, while some other countries gave cryptocurrency official status as currency for tax purposes.
The lack of legal framework in many countries is still a hurdle, as legal precedents for cryptocurrency are still being set. And due to the limited ability to control cryptocurrency on the open internet can mean it can be used against the will of a government even. Volatility of cryptocurrency. Due to cryptocurrency being an emerging market and due to the changes it imposes on the financial system, the market is still volatile, coupled with many of the factors above, the price of a coin can rise and fall quickly, making it a risky investment without proper research carried out, but the utility of them can make them usable for payments as well as an investment which was one of the original intentions behind Bitcoin. The volatility is decreasing over time and this should hopefully result in lower volatility levels in the price. Summary. This article has discussed many of the driving factors of cryptocurrency price and why people give it value. There are many factors, especially the price of Bitcoin, the de factor reserve currency of the Bitcoin world, price of the U.S Dollar, Innovation, energy put into securing the blockchain of a coin, and reputation issues such as public perception, scams, and media response.
Dilution of the market means many alternative cryptocurrencies will find it hard to gain a foothold. But many have a cult following so have some value. Legal issues can vary the price also as discussed above. The world of cryptocurrency is here to stay, and as people give it value as a store of wealth in the case of Bitcoin, its revolutionary payment processing ability and the ability to work between borders are all reasons to continue to use cryptocurrency. Conclusion. This article has discussed what affects the value of cryptocurrency and what can give it value. It boils down to perception of a majority, anything has value to someone because they believe it has value, for whatever reason they may have. The main factors affecting value of cryptocurrency have been discussed and summarized, and perception of value is what ultimately gives it value, what people are willing to put in to get a unit of cryptocurrency, be it time, fait money or labour. The same applies to any commodity such as food, water, shelter, technology or any other commodity. Effort put into creating/obtaining it and demand. So keeping cryptocurrency positive in the perceptions of people is key to maintaining value in any cryptocurrency or commodity.
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