How Cryptocurrency is valued: Cryptocurrency investments are speculative, and their volatile prices can swing wildly in a short amount of time. Because of this, it’s hard to predict how much money an investor will make or lose with any cryptocurrency.
Investments in cryptocurrencies have posed a high degree of risk to investors due to price fluctuations and have been involved in sharp price declines. However, many coins have experienced an increase in value over the course of 2017, with the majority of coins showing a return of more than 1,000% in 2017.
Cryptocurrency markets are extremely volatile and investors should be prepared to lose their entire investment. Because of the nature of the cryptocurrency markets, profits and losses tend to occur over a short period of time, and price fluctuations can occur over the course of a single day.
The cryptocurrency markets are open to the general public, but it is not recommended that the markets be traded by retail investors. Cryptocurrencies are extremely speculative, and the market is highly unregulated. Many investors choose to trade cryptocurrencies using online exchanges, which may be more secure than physical exchanges. Online trading platforms offer tools to ensure the safety of an investor’s assets.
Cryptocurrencies are valuable because of their underlying technology. The value of a currency is partly based on the utility that a currency provides. If a currency is used for making payments, then it has utility. Utility is a fundamental characteristic of a currency.
Another important characteristic of cryptocurrencies is their decentralized nature. Decentralized currencies are not issued by or managed by a central bank and therefore do not need to be backed by any physical commodity. This characteristic makes them attractive to speculators because it eliminates the need for a trusted central entity.
Defining the Problem: Crypto is not backed by anything
Cryptocurrency is a digital currency that is exchanged and traded primarily online and utilising cryptography to create and verify transactions. Cryptocurrency has no physical form and it is not backed by any government organisation, bank or other authority. The cryptocurrency market is volatile with large fluctuations occurring in prices on a daily basis. The value of cryptocurrency can be determined by looking at its supply and demand.
The Solution: Valuation using an exchange
Cryptocurrency, also known as virtual currency or digital currency, is an encrypted medium of exchange. These are not printed commodities that are minted into existence by a government before being distributed to the public. They are decentralized, meaning that they are not controlled by any one bank or government. The value of this type of currency is determined through market forces, which consist of interested buyers and sellers who determine the worth of a cryptocurrency in either fiat money or another type of cryptocurrency. Since it is decentralized, cryptocurrencies are not susceptible to a single central authority. Cryptocurrencies are also pseudonymous, meaning that it is not possible for a third party to attribute your transactions to you. Finally, they are also anonymous, meaning that they are not linked to your physical identity. The solution is using an exchange .
Final Thoughts
Cryptocurrency has emerged in 2009. Since then, there has been an increasing number of them in the market. While cryptocurrencies are not really tangible assets, it can be argued that they are valuable because they offer a means to store value without relying on any other party. The rise of cryptocurrency also coincides with the crisis in 2007-2008 which led to the collapse of many national currencies.
