I know the value of Fiat currencies is backed by their corresponding government’s stability/military/underlying economy. What’s backing up crypto? Is the value simply driven by market demand or is there more to it? I completed the “Crypto for Beginners” course but didn’t really get a clear answer to this basic question.
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I think the most valuable things that blockchain brings are Transparency and decentralization. in the case of bitcoin imagine all of the central banks are printing money to pay their debts, controlling inflation and so on but what about bitcoin? can anyone make some fake bitcoins out of its original supply?
Hi Alireza, thx for the reply. I understand you can’t create bitcoin like they can print money. What I am trying to understand is what its original value stems from. Is it simply based on market demand a.k.a. how many of it are being bought?
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how about shortcutting governments to access our money?
I can pay you directly without any government as man in the middle
Thx Alireza. I get the benefits (why people buy it). I am wondering though if its value is simply determined by market demand?
in my opinion the market just shows the price , supply and demand on paper shapes the price (market makers always have great hands on it don’t forget that).
in my mind value is something different from price
I see what you mean and this also answers my question. Thank you for the input!
Don’t think you quite got your answer. From my time being in crypto, depending on WHAT type of cryptocurrency you’re on, dictates “backing”. Strong communities are behind meme coins for pump and dumps, but the crypto itself can be utilized for its own marketplace, NFTs, games, staking rewards, and more.
If we delve into something more solid like bitcoin, it has several big names backing it for it’s birthed solidified technology. It caps at 21m bitcoin, has “halvings” (50% halving) every 4yrs. Cryptocurrency is a broad term.
Ethereum. You’re purchasing a “crypto” here but you’re more purchasing & supporting a “software”. Ethereum has utility for its blockchain. It’s basically a platform to build on top of. This allows several developers to build, thus increasing its value because of innovation such as Decentralized Finance (DeFi) & Decentralized Autonomous Organizations (DAO). The technology backs itself. Once discovered, it raises in value & even more when utilized.
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You can also say crypto is backed by fiat currencies all around the world. Which are backed by what you just said, making crypto as real as the paper & plastic in your wallet.
Speculation, hype. In the case of Bitcoin it is the deflationary property that is a hedge against inflation.
Value of bitcoin is also tied to the fact that it is not government controlled and that you can transfer large amounts of money with BTC in seconds for low fees.
Then you have all the smart-contract platforms promising some form of utility like DeFi and NFTs for gaming etc.
Basically utlitity in crypto (aside from BTC) is anything that is driving a network effect and providing a blockchain based service (computation and cloud computing) that there is a demand of.
This “percieved value” can change at any time, so it is difficult to identify any fundamental long term value of a specific Blockchain network.
Thx everyone for pitching in!
From what I’ve learned, the value of cryptocurrencies is indeed driven by market demand, but there’s more to it. Unlike fiat currencies backed by governments, crypto’s value relies on several factors. First, it’s about adoption and real-world use cases. The more people and businesses accept and use a particular cryptocurrency, the more valuable it becomes.
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I’ve been into crypto for a while, and you’re right; it can be a bit tricky to grasp what drives their value. It’s a mix of factors, like market demand, utility, adoption, and even speculation. Think of it as a blend of technology and trust. Don’t worry; it takes time to fully wrap your head around it! And it’s important to check on all types of useful sources, like cryptocurrency presales. Then you’ll get it!