In today’s fast-paced world, nothing is static. Everything changes and morphs at an accelerated rate. In the digital world, this phenomenon is more visible than ever before. It is no wonder that so many cryptocurrencies have entered the market in recent years. As new and improved versions are developed, we see a dynamic shift between them. Of course, you probably already know the implications of this virtual money system. Essentially, it has disrupted trust in banks as a storage provider for general value, including stocks and bonds – or in this case – cryptocurrency. Many people are now choosing to invest in digital assets instead of traditional financial products as a hedged bet against inflation or other economic concerns that might adversely affect their savings over time. In this article, we break down some factors that affect the value of cryptocurrency and how these attributes influence its price point over time.
Basing your prediction on supply and demand can have a huge impact on the value of cryptocurrency. If the demand is higher than the supply, the price of a cryptocurrency will rise. It’s as simple as that. If, however, the demand is less than the supply, the price will decrease. The supply and demand of cryptocurrency is affected by many things, including government regulation and even the cryptocurrency’s functionality. As new cryptocurrencies enter the market, their supply is high as they are just beginning. Therefore, demand will be low as people don’t know about the cryptocurrency or may not trust it enough to trade or purchase it. As time goes on, however, and people become more aware of the cryptocurrency and trust it more, demand will rise. The cryptocurrency will then have a lower supply but higher demand, causing the value to increase.
The network effect is a phenomenon in which a product or service becomes more valuable to people the more people use it. This is because the usage of a product by others gives you added value. A popular example of a service or product with a network effect is Facebook, as the more people who use it, the more value you get out of it. Other examples of goods with network effects are the telephone, internet, and education. The same theory applies to cryptocurrencies. They become more valuable the more people use them. If the network effect of a cryptocurrency is strong, it will lead to an increase in demand and value. The network effect is related to the concept of Metcalfe’s law, which states that the value of a network is proportional to the square of the number of users in the network. For example, let’s say that there are 100 people using a certain network. The network’s value is 100 * 100 = $10,000. Now, let’s say that the number of users doubles to 200. The network’s value will increase to 200 * 200 = $40,000.
The blockchain technology that a digital currency runs on can affect its value. For example, if a cryptocurrency uses a Proof-of-Work (PoW) algorithm, the blockchain is decentralized and anyone can contribute to its maintenance. Therefore, a PoW cryptocurrency will have a larger supply than a cryptocurrency that uses a different blockchain. A PoW cryptocurrency also requires energy and computing power to maintain the blockchain, which means there are associated costs. Therefore, the value that a PoW cryptocurrency holds will have to be higher than the value of a cryptocurrency that uses a different blockchain technology, otherwise it would be unprofitable to mine. Also, different blockchains have different advantages and disadvantages. For example, a cryptocurrency that uses a Proof-of-Stake (PoS) algorithm has a smaller supply than a cryptocurrency that uses a PoW algorithm. However, a PoS cryptocurrency also has upper limits on the volume of transactions that can be processed. Therefore, the value that a PoS cryptocurrency holds will have to be higher than the value of a cryptocurrency that uses a different blockchain technology, otherwise it would be unprofitable to mine.
The value of a cryptocurrency can greatly be impacted by news and media. If a particular cryptocurrency has been making headlines for good reasons, it can increase the demand for the cryptocurrency and lead to an increase in its value. On the other hand, if a cryptocurrency has been making headlines for bad reasons, it can decrease the demand for the cryptocurrency and lead to a decrease in its value. The value of a cryptocurrency can also be impacted by the number of people that are talking about it on social media or in other online forums. For example, if many people have positive things to say about a particular cryptocurrency, more people are likely to buy it. This is because they will trust the cryptocurrency more and think that it is a good investment.
Government regulations can have a major impact on the value of cryptocurrency. If a government announces that it will regulate a particular cryptocurrency, it can affect the value of the cryptocurrency. Many governments, for example, are concerned about money laundering and the financing of terrorism. They are also worried about the stability of their own currencies. Therefore, they may choose to regulate a particular cryptocurrency to track its ownership or even ban it entirely. If a government regulates a particular cryptocurrency, it can lead to an increase in the supply and decrease the demand, which can lower the value of the cryptocurrency. On the other hand, if a government announces that it will not regulate a particular cryptocurrency, it can lead to a decrease in the supply and an increase in the demand, which can increase the value of the cryptocurrency.
Legal issues can also have a major impact on the value of cryptocurrency. If a company that develops a particular cryptocurrency is sued or faces legal charges, it can negatively impact the value of the cryptocurrency. If a company is sued or faces legal charges, it could mean that the company did something illegal or unethical. This can make people less likely to buy the cryptocurrency and can lead to a decrease in the demand for it. This can lead to a decrease in the value of the cryptocurrency. On the other hand, if a government or organization makes a statement about a particular cryptocurrency that makes people trust it more, the demand for it can increase. This can lead to an increase in the value of the cryptocurrency.
The process of mining a cryptocurrency can affect the value of the cryptocurrency. If the value of a cryptocurrency goes up, more people will want to mine it. As more people start mining a cryptocurrency, the difficulty of mining it will increase. This can make mining unprofitable and even unviable for some people. As more people start to drop out of mining a cryptocurrency, the supply will decrease. This can lead to an increase in the value of the cryptocurrency. On the other hand, the value of a cryptocurrency can be negatively impacted if mining it becomes less profitable. If the value of a cryptocurrency goes down, it will be less profitable to mine it. As more people stop mining a cryptocurrency, the supply will increase. This can lead to a decrease in the value of the cryptocurrency.
The factors that affect the value of cryptocurrency are numerous. The supply and demand for a particular cryptocurrency, its blockchain technology, news and media coverage of it, government regulations surrounding it, and even the cost to mine it can all impact the price. As the crypto market is still very young and new, many of these factors can change quickly. So, when investing in crypto, be sure to understand the factors that affect its value. This will help you make better investment decisions.
Quebec's largest pension fund had $150 million invested in bankrupt crypto lender; Celsius.
The Canadian regulators are working alongside their counterparts in the US as multiple jurisdictions investigate the multi-billion-dollar collapse of cryptocurrency lender Celsius Network LLC.
The Ontario Securities Commission has a similar interest in whether the Celsius collapse affected Canadians and, sources say, there were clients in Ontario.
Celsius was not registered with provincial securities regulators in Canada, and Canadian regulators are understood to be collaborating with the U.S. Securities and Exchange Commission (SEC), as they often do on matters that span the Canada-U.S. border.
The SEC is also working with regulators in several states, including Texas, according to one source. In mid-June, Reuters reported that state securities regulators in Texas, Alabama, Kentucky, New Jersey and Washington all began investigating Celsius Network shortly after the crypto lender suspended customer redemptions. Joseph Rotunda, enforcement director at the Texas State Securities Board, told Reuters at the time that his state’s investigation was a “priority,” and he has subsequently posted public appeals on LinkedIn encouraging Celsius clients in Texas and other states to come forward.