So cryptocurrency we already seen about that,so now we are going to discuss about why the value of digital currency is in see-saw.
First we need to know some knowledge about what is called money?how it has evolved into human life?
Money is an verifiable record and generally accepted as a payment for goods and services.Let's look this quote "The price of anything is amount of life you exchange for it " by Henry David Thoreau.Up to 20th century we used some intrinsic value materials such as gold,silver and some metals and used as medium of exchange.That's called Commodity money,After that US introduced a new system called Fiat Money,It has no intrinsic value,It has declared to a legal tender(Eg.RBI).Most of the currencies based on precious metals like gold,silver etc..Centralized system was backed one physical good like gold or silver then give an value to one paper,That's called Fiat money(Eg,US Dollar,INR).But fiat money is based upon faith and credit of economy.yes,we are believing a paper has value.For eg. We believe one paper is cash and value of it Rs.100.It is controlling by bank or government,That has the power to demonetize it,Recently within a night Indian government announced demonetization of Rs.500 and Rs.1000. After that rupees are just an paper.So we are working hard to earn money, we pay taxes for that, but our money is not in our hands, some legal tenders or government decides, is it money? or paper?.
back to cryptocurrency,Just like Fiat,We exchange our money into digital currency.Digital currency is virtual thing,it's in air,if you believe one paper is called money,Then you must believe this virtual thing also has some value.But it works like commodity money.
Why does Cryptocurrency have value?
First we need to know some knowledge about what is called money?how it has evolved into human life?
Money is an verifiable record and generally accepted as a payment for goods and services.Let's look this quote "The price of anything is amount of life you exchange for it " by Henry David Thoreau.Up to 20th century we used some intrinsic value materials such as gold,silver and some metals and used as medium of exchange.That's called Commodity money,After that US introduced a new system called Fiat Money,It has no intrinsic value,It has declared to a legal tender(Eg.RBI).Most of the currencies based on precious metals like gold,silver etc..Centralized system was backed one physical good like gold or silver then give an value to one paper,That's called Fiat money(Eg,US Dollar,INR).But fiat money is based upon faith and credit of economy.yes,we are believing a paper has value.For eg. We believe one paper is cash and value of it Rs.100.It is controlling by bank or government,That has the power to demonetize it,Recently within a night Indian government announced demonetization of Rs.500 and Rs.1000. After that rupees are just an paper.So we are working hard to earn money, we pay taxes for that, but our money is not in our hands, some legal tenders or government decides, is it money? or paper?.
back to cryptocurrency,Just like Fiat,We exchange our money into digital currency.Digital currency is virtual thing,it's in air,if you believe one paper is called money,Then you must believe this virtual thing also has some value.But it works like commodity money.
Why does Cryptocurrency have value?
Simple,It's popular.Many peoples accepted that as payment and doing trade using it.It's also acts like equity.it is very hard to trace by government and don't need to pay tax for that.So People decide their value.
So why is it in fluctuation? lets see about it
1.Supply & Demand
The value of bitcoin is purely based on the laws of supply and demands.It's price is determined by the people in the market.If more people want to buy bitcoins,then the price will increase.If they want to sell ,the price will decrease.
2.Limited Numbers
There is only a limited number of cryptocurrencies in circulation and new coins are created at a predictable and decreasing rate. It take a lot of time to create on cryptocurrency.Now Litecoin(LTC) is faster block generation coin compare to other digital currency.
3.Beneficial
One more factor is Usage of Digital coins,If you cannot use it for your utility like investment or payment,it will be useless.This Digital coins are used as payment in high scale,so it leads to investment.The changes on utility can cause the price volatile.
4.Buyers
An investors invest large amount of capital,to buy a large number of coins,So it can cause price fluctuation.This type of investors and their investments will make an confidence among peoples.It could encourage them to invest in this field,So more buyers,more investment,increase the price.
5.Other factors
To secure the blockchain we are using electricity,so peoples trust their security So peoples trust that security level and invest in that.And perception on its value by the public ,media and scams in banks / governments this type of factors change the mindset of people and invest in cryptocurrencies.
2.Limited Numbers
There is only a limited number of cryptocurrencies in circulation and new coins are created at a predictable and decreasing rate. It take a lot of time to create on cryptocurrency.Now Litecoin(LTC) is faster block generation coin compare to other digital currency.
3.Beneficial
One more factor is Usage of Digital coins,If you cannot use it for your utility like investment or payment,it will be useless.This Digital coins are used as payment in high scale,so it leads to investment.The changes on utility can cause the price volatile.
4.Buyers
An investors invest large amount of capital,to buy a large number of coins,So it can cause price fluctuation.This type of investors and their investments will make an confidence among peoples.It could encourage them to invest in this field,So more buyers,more investment,increase the price.
5.Other factors
To secure the blockchain we are using electricity,so peoples trust their security So peoples trust that security level and invest in that.And perception on its value by the public ,media and scams in banks / governments this type of factors change the mindset of people and invest in cryptocurrencies.
Great buddy
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