Categories: Crypto Currencies

Where Does Cryptocurrency Value Come From

Value of Cryptocurrency

Everyone who follows the jumps in the bitcoin rate wondered how it is formed and what does it depend on: why did it fall yesterday, and maybe tomorrow it will soar by $ 1000? any cryptocurrency by itself is essentially a set of “candy wrappers”. These candy wrappers are worth something only when real money is offered for them, in one or another equivalent. While bitcoins were simply mined, without offering anything for them, they remained candy wrappers.

For example, in 2010, a dude named John bought two pizzas for 10,000 bitcoins. At the that time exchange rate was about $ 40-50 – or 0.5 cents for one bitcoin. Three years later, in 2013, one bitcoin was already worth about $ 900. Today bitcoin is valued at over $ 32.650.

This growth was due to an increase in its capitalization. In a simple way, people became interested in bitcoin, and they began to invest real money in it. Exchangers and exchanges have appeared that allow you to convert cryptocurrencies in both directions.

Any cryptocurrency, in particular Bitcoin differs from ordinary currencies to which everyone is accustomed, and the main difference is that it is not backed by anything, is not regulated by anyone, and is not tied to any state or economy. Its price is determined – no matter how ridiculous it sounds – solely by people’s faith in it (and not just supply and demand, as they sometimes say – although this is pretty close). But this is far from the only factor: the bitcoin rate is complex and is established under the influence of many factors.

You should always remember that any cryptocurrency, bitcoin, due to its insecurity, costs exactly as much as it is offered for it. No more and no less.

Supply and demand

Of course, the first logical factor in the rate change is the ratio of supply and demand, as for any asset in demand on the exchange. The exchange rate grows in the face of increasing demand, if people are ready to buy and buy, and decreases if demand falls.

The factors that affect the demand can be as following-  the popularity of the currency, advertising and a good media background (positive news about bitcoin) and “pumpers”. For example, the recent message about the recognition of the halal cryptocurrency for Muslims instantly raised the rate by $ 1000. And the massive interest of the population and the fact that bitcoin is “on everyone’s lips” is slowly raising the BTC rate.

Also see : How Long Does a Bitcoin Transaction Take

Cryptocurrency Pumpers

Let’s look at Pumpers more closely.

The most interesting thing begins when the rate rises sharply or falls sharply. This does not at all indicate the explosive interest of the population in cryptocurrency: it means that

a “bull” has come to the exchange – a pumper.

A pumper (from the English pump – to inflate: the planned artificial inflation of the rate) is a player with a large amount of an asset (in this case, bitcoins) who can instantly buy up sell orders, thereby raising the rate to maximum values ​​extremely quickly.

So a Pumper artificially creates a wave of general excitement among inexperienced traders, buying up orders at the right time and creating the illusion of stable growth in bitcoin. Newcomers buy, and at the peak of activity, the pumper creates a dump (intentional collapse of the rate) and dumps assets, lowering the bitcoin rate to a minimum.

The fall may also be affected by a short-term long-term release of currency on exchanges.

Let’s not forget about the creator (or creators – no one know

s for sure whether it is one person or a group) of Satoshi Nakamoto Bitcoin, which, according to rumors, holds one million bitcoins. Dumping even ten percent of this amount will inevitably lead to a collapse.

What you need to monitor in order to predict the rate of Bitcoin:

Economic news. At the time of scandals, the BTC rate went down sharply, because traders start selling cryptocurrency out of fear. Then the cheaper Bitcoin is bought by other players, as a  result of which it becomes more expensive.

Analysis of the activity of pumpers. After waiting for a period of smooth bitcoin correction, the “bulls” begin to massively buy up the asset and the exchange rate chart jumps up sharply.

Technical analysis. Price corridors, maximum and minimum levels, overbought and oversold zones.

Analysis of conventional news. Bitcoin is highly dependent on hype: mass interest and the associated word of mouth.

There are many factors influencing the bitcoin price , and most of them are questionable. That is why bitcoin is so highly volatile, unlike “traditional currencies,” and that is why it can either get rich instantly or go broke.

Also see : Is Bitcoin Cash a Good Investment in 2021?

Olivia Chloe

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