What Affects Cryptocurrency Value?
When it comes to what affects cryptocurrency value, there is no easy answer. It’s no secret that cryptocurrency can be volatile. Therefore, the value of these coins tends to fluctuate much more often than regular currencies. If fewer factors were contributing to the value of cryptocurrencies, we would likely see much less volatility. Additionally, because it is still a relatively new concept, we’re still waiting to see whether specific trends are constant or simply coincidental. We’ve all heard the phrase correlation does not equal causation, and that sentiment certainly applies to cryptocurrencies as well. Whether you’re a seasoned crypto pro or a brand new investor, learning a little more about what affects cryptocurrency value is always a good idea. From media exposure to node count, here is your guide to what affects cryptocurrency value.
What Affects Cryptocurrency Value: 7 Different Factors
Supply and Demand
Perhaps the most apparent factors impacting the value of cryptocurrencies are supply and demand. It's simple economics; if the supply is lower or the demand is higher, the currency's value will be higher, especially true with many cryptocurrencies, as the supply is finite. However, these new digital currencies can face drastic demand changes due to institutional failures. While digital currencies cannot be hacked, in theory. There are institutions (exchanges, organizations, etc.) that have been compromised, spreading fear throughout the space. It's not an incredibly common occurrence, but the possibility is there, and if an exchange faces hacking issues, the value of the currencies can also go down in value along with it. There's a bit of a domino effect at play when currencies tank in this way.
Competition
Bitcoin is easily the most well-known cryptocurrency on the market. As time progresses, we see countless new coins entering the market. With relatively few barriers to entry, more and more De-Fi tokens and initial coin offerings (ICOs) are on the horizon. This increase in competition is great news for those looking to invest in the crypto market, as it helps keep prices in check. Fortunately for Bitcoin, its high visibility makes it less susceptible to this competition.
Node Count
Node count is another solid indicator of the value of a cryptocurrency. Essentially, node count is a measure of the number of active wallets on the network. You can find the node count on the homepage of most currencies, or you can search for it directly on the internet. This method of measuring value is helpful because it only counts active wallets, and some argue that it is more valuable than the method of ranking based on market capitalization. This method also works to estimate the strength of the community surrounding a cryptocurrency generally. If the number of nodes is higher, that generally relates to a stronger community. It's helpful to have a general idea about the strength of community because it can help you calculate a currency's ability to overcome a crisis.
Cost of Production
There are certain costs—both direct and opportunity—associated with the production of any cryptocurrency. Bitcoin has an incredibly high cost of production, which can be part of why Bitcoin has value in the first place. The costs of mining Bitcoin include both equipment costs and significant energy costs. Many argue that the energy consumption of mining Bitcoin will be the reason for its demise, as it is estimated that energy costs range from $400 million to $6.2 billion. Other cryptocurrencies have lower production costs, which leads to lower overall value. Still, with currencies like Ether, there is an endless supply of coins, meaning that earning potential could last much longer than coins with a finite amount. These mining costs also provide safety to users, as mining ensures that governments can't easily shut down blockchains.
Regulations
While the decentralized, digital nature of cryptocurrencies leads to a reduced possibility of government intervention, that doesn't mean there is no regulation within the market of cryptocurrencies. There is some debate over how to classify these digital assets, with the Securities and Exchange Commission (SEC) classifying them as securities, but the U.S. Commodity Futures Trading Commission (CFTC) considers them a commodity. The lack of clarity over which regulator will ultimately set the rules has created a lot of uncertainty despite surging market capitalizations. Because cryptocurrencies are becoming much more mainstream, we can be sure that regulation is coming. This can be seen through certain institutions banning cryptocurrencies, which we've seen on a smaller scale in Russia and China, and on a much larger scale in countries like Bolivia and Thailand, where Bitcoin is banned altogether.
Media Attention
Media attention can significantly impact the price/value of cryptocurrencies, which can range from traditional media outlet reporting to social media trends. One of the most recent examples of this media influence came from a tweet from Tesla founder Elon Musk. The tech mogul tweeted a meme about "breaking up" with Bitcoin. This tweet, coupled with the decision to end Tesla purchasing using Bitcoin, led to a dip in the currency's value. It's essential to keep in mind that this sort of media influence is not necessarily unique to cryptocurrencies, as we can see through the meteoric rise of AMC and Gamestop stocks earlier this year.
Pelicoin Cryptocurrency ATMs
Regardless of what affects cryptocurrency value, investors can quickly and easily access their cryptocurrency using our Pelicoin ATMs. We have over thirty machines located all across the Gulf South, and most machines are accessible 24 hours a day. There may be many factors involved in determining the value of cryptocurrency, but our machines are easy to use even for novice crypto investors.
Pelicoin ATMs are one of the fastest, most secure ways to convert your cash into cryptocurrency on your own time. Check out our locations to find the one closest to you, and get started on your investments today.