The cryptocurrency world seems like a quite complex thing for the beginners. Well, we need to agree with this. This invention is completely new and it will pass a lot of time before people completely adapt to it. Besides that, you will find a group of people that are completely unfamiliar with this subject. They have heard about it in the news, but they still can’t imagine that fiat money will be replaced with the virual one.
This is the first thing that you should hear. It is true that cryptocurrencies do not come in the same shape as the traditional money. However, that doesn’t mean that Bitcoin and other cryptos do not have value. In each moment, you will get or spend real money for buying or selling this sort of coin.
Well, this is the moment when things become a bit complicated. People do not truly understand how to value Bitcoin and other cryptocurrencies. That’s why we are here to help.
However, the pieces of information that you will find here won’t make you become a millionaire. It is necessary to connect with the right people and gather valuable pieces of information. Fortunately, information is everywhere around us. A website like bitcoinscircuit.com can help you improve your knowledge and earnings.
Anyway, we are here to help beginners. We understand that valuing BTC and other cryptocurrencies is a tough challenge. Here are some pieces of information that will make the entire process easier.
Value Based on Cost of Mining
It doesn’t matter which type of crypto attracts you the most. Each one that you want to use requires miners to mine it. Because of that, mining costs is one of the most important factors that influence value.
However, there is one important thing that you need to know. When current crypto becomes popular among users, there is a big chance that the number of its miners will increase. That could bring new difficulties that can confuse the beginners a little. More precisely, it will make things more interesting.
Let’s compare this with a business world. When a certain niche starts to attract many entrepreneurs, it becomes more competitive. The things are the same when we talk about cryptocurrencies and miners.
Yet, a huge number of miners does not always mean that you won’t be able to become rich. This depends on the quality of their mining. For instance, if they are losing money by mining, or if mining is very profitable, it can influence on the crypto to be overbought or oversold. These two things will have a huge impact on the value of any cryptocurrency.
Value Based On Quantity Theory of Money
Okay, this method of determining value is more complex because it contains a lot more things. More precisely, you would literally have to consider all the important factors associated with your crypto. For example, this includes things like the velocity of transactions, total supply, and the cost of the goods and services crypto is used for.
So, is everything easy in this case? Unfortunately, things can become more difficult because of one single problem.
It can happen that a generous output falls short of the cost of mining and fails to account for crypto as a store of value. Of course, this is not something that should scare you. With a proper knowledge improvement, this problem is going to be a bit predictable.
Value Based Within a Certain Ecosystem
We already said that the demand of current crypto influences a lot on its value. It is important to know that a lot of cryptocurrencies are native to a current ecosystem. More importantly, some of them are even acting as the main currency in a given economy.
Have you ever heard about a KIK messenger? Well, KIK has a native token under the name KIN. KIN cryptocurrency acts as the main one within the KIK ecosystem. Because of that, it is not difficult to determine its value.
Let be a bit creative and imagine that popular online marketplaces like Amazon only work with a specific “token”. In that case, a certain dose of pressure would exist because it would be necessary to find a stable price within that ecosystem.
Scarcity is one more basic economic factor that influences the value of cryptocurrencies. In this case, we will use the value of Bitcoin as an example. This is the most popular crypto in the world and it has value in its limited supply. Despite that, it also have a controlled pace at which new coins are issued.
Because of its popularity, the demand on the market will grow. However, the supply remains the same. Because of that, the value of 1 BTC is constantly growing.
Still, what would happen if an investor does not want to sell it? Well, in that case, BTC or any other crypto will become scarcer.
As you probably know, cryptocurrency is software. Fortunately, we live in a world of advanced technology. It seems that there won’t be limits when we talk about technology and its improvements. Because of that, this software can evolve and be upgraded in every moment. Well, each update that comes makes Bitcoin or any other cryptocurrency quicker and faster. Despite BTC, Ethereum’s platform is also a good example. Finally, faster computers and better internet connection will make any software more effective.
Well, these improvements will always raise the value of current crypto. If the software works slowly, that would reduce the demand on the market. Why would an investor want to invest in that type of crypto? However, it works fast and it is perfectly safe, then that will raise the demand.
If you want to predict the value of a certain currency, you should start following the news on social media. Our recommendation is to follow Twitter the most. Many crypto experts are sharing their personal opinions here.
If current crypto has many positive reviews on social media, there is a big chance that its value will grow. However, you should be careful with this factor. It matters who suggests a good crypto. It needs to be someone who has the credibility to talk about it.