Unless you have arrived recently on earth, you might have noticed something called “Cryptocurrency”  getting discussed a lot! Cryptocurrency is in the news for many reasons, and people are getting confused about it with different reports coming in from all directions!

What determines the value of a cryptocurrency?

In this blog, we will try to make it easier to understand how does cryptocurrency gain value. We are trying to answer the most critical question for an investor: “How does cryptocurrency gain value?” and “what factors affect cryptocurrency’s value?” or “what determines the value of a cryptocurrency”?

The Basics

Cryptocurrency transactions require a digital asset or currency. Users can use private as well as public keys to transmit cryptocurrency between two parties. The best way to think about them is virtual tokens that show up in an internal system as ledger entries. Likewise, To ensure the security of financial transactions, this internet-based blockchain medium uses encryption.

Bitcoin’s decentralized monetary system, which has no central authority, is what makes it so appealing. Despite their portability, fungibility, inflation resistance, and transparency, their impact on the banking and legal industries may be negative. Nonetheless, cryptocurrencies have received a lot of negative coverage due to their association with illicit or unlawful acts.

Supply and Demand 

A cryptocurrency’s supply is never unknown. Some, like Bitcoin, have a finite supply. Others, like Ether, do not have a supply limit. Some cryptocurrencies have systems in place to “burn” old tokens in order to keep the circulating supply from getting too high and curbing inflation. To burn a token, send it to an unrecoverable blockchain address.