Earlier when the cryptocurrency was utterly a new term for people, it was indeed difficult to figure out the amount people would be willing to invest in it. But when the digital currency aroused a big heat around the globe with people from all social classes joining the digital market and making instant transactions or even speculating on it, it became quite obvious that people will be inclined to pay decent value for it.
So when digged deeper, it was concluded that price of cryptocurrency depends on its demand while the demand depends on some other factors, which are as follows:
- Total token supply
- Application
- Loyal Customers
- Market
The price of cryptocurrencies increases as the demand increases, which is dependent on the following factors.
Factors Affecting the Demand and Price of Cryptocurrencies
Total Supply
The demand is inversely proportional to supply. People crave for those things which are limited in supply.
For example: We go back to 1998 when baseball cards were popular among children who agreed to pay more price for the same to become champion of the team. The same is true with cryptocurrency, they are released in fixed numbers. The more they are being sold out, the less is the availability and hence the value of the coin takes a hike.
Applications
We are still at the early stages of cryptocurrencies and blockchains. There are many companies formed to facilitate the use of cryptocurrencies. Some focus on merging cryptocurrency with blockchains, some aim at providing safety and security while other companies are making efforts to make cryptocurrency globally acceptable standard currency for business transactions.
So, cryptocurrency is serving different utilities to different people. The demand for cryptocurrency depends on the utility it gives you. Increased utility implies increased demand.
For example: The baseball cards which were simply holographic cards for parents which keep their children occupied, had no actual utility for parents while for children they served as an entertainment media and they are ready to pay to accomplish this demand.
Community of Loyal Followers
Best selling currencies are always backed by loyal following as they will always invest in the currencies which will fruit them with good returns and ensure security at the same time. It means they will always pay for the currency which satisfies their preferences. The more loyal following a currency has, the more will be its demand.
For example: If you want to buy a new smartphone, you will be ready to pay a reasonable price for the one which satisfies your preference like camera capacity.
A loyal following/community that believes in the existence of certain crypto is certainly the initial driving force for long term sustainability.
Market Fluctuations
Market speculation greatly impacts the demand for cryptocurrency akin share market. We have already witnessed a big twist in the year 2017 when market speculation brought volatility in token prices. Analyst predictions, rumors & official announcements may cause alterations in the demand and price of currencies up to a great extent.
Al these factors play a major role in determining the price of cryptocurrency by directly or indirectly affecting the demand. If you are looking to invest in a reliable and futuristic cryptocurrency, check out Bitica (BDCC) coin, which is a digital currency backed by a next-generation smart contract and decentralized application platform for crypto revolution.