Cryptocurrencies are the most recent 'big thing' in the digital world and have now been recognized as being the main monetary system. In fact, enthusiasts have tagged it as 'the revolution of money' ;.

In clear terms, cryptocurrencies are decentralized digital assets that may be exchanged between users without the need for a main authority, the majority of which being created via special computation techniques referred to as 'mining' ;.

The acceptance of currencies, like the US Dollar, Great British Pound and the Euro, as legal tender is basically because they've been issued by a main bank; digital currencies, however, selfdrops such as for instance cryptocurrencies, are not reliant on the confidence and trust of the public on the issuer. As such, several factors determine its value.

Factors that Determine the Value of Cryptocurrencies

Principles of Free Market Economy (Mainly Supply and Demand)

Supply and demand is a major determinant of the value of anything of value, including cryptocurrencies. This is because if more folks are willing to buy a cryptocurrency, and others are willing to offer, the buying price of that specific cryptocurrency will increase, and vice versa.

Mass Adoption

Mass adoption of any cryptocurrency can shoot its price to the moon. This is because of many cryptocurrencies having their supply capped at a particular limit and, according to economic principles, a growth in demand with no corresponding increase in supply will lead to a price increase of that specific commodity.

Multiple cryptocurrencies have invested more resources to ensure their mass adoption, with some focusing on the applicability of their cryptocurrency to pressing personal life issues, as well as crucial day-to-day cases, with the intention of making them indispensable in everyday life.

Fiat Inflation

In case a fiat currency, like the USD or GBP, becomes inflated, its price rises and its purchasing power drops. This will then cause cryptocurrencies (let's use Bitcoin as an example) to boost with respect to that fiat. The end result is that you will have the ability to obtain more of this fiat with each bitcoin. In fact, this situation has been one of the major reasons for Bitcoin's price increase.

Scams and Cyber Attack History

Scams and hacks may also be core factors affecting the value of cryptocurrencies, as they are known to cause wild swings in valuations. In some instances, the team backing a cryptocurrency will be the scammers; they'll pump the buying price of the cryptocurrency to attract unsuspecting individuals and when their hard-earned money is invested, the price is shortened by the scammers, who then disappear with no trace.