Stories abound in the internet about how investing in cryptocurrency can create life-changing wealth or financial freedom. Cooper Turley invested in crypto four years ago and is now worth seven figures. Heather Delaney has seen a 585% increase in her crypto investment. She has not cashed out, but considers it her pension plan. With crypto becoming more mainstream these days, more and more people are building digital portfolios although almost everyone knows that crypto is extremely volatile. What factors affect or put value on a cryptocurrency coin?
Usefulness
Crypto is not just currency which you can use to purchase goods and services. They can be used as dividend payments, a mode of exchange within the blockchain, or voting rights. Ethereum is a platform where developers can create apps without the involvement of third parties. Vechain’s platform allows companies to track their products through the supply chain.
Scarcity
A coin’s value increases as it grows in popularity and adoption. Since most cryptocurrency have limited supply, its popularity helps drive the prices up. Be careful though of coins that gain popularity through marketing tactics but do not have any concrete use or project in line or coins that have too much supply. If a coin is involved in a scandal or is perceived to be a scan, the demand AND the price can go down very quickly.
Cost of Production
Crypto coins are produced through mining, which is done on a computer. In a proof-of-work system, the more competition there is to mine a certain crypto, the more difficult it is to mine. The miners then will need powerful equipment to mine successfully, which will increase mining costs necessitating an increased crypto value. The miners will not mine if mining will not cover their costs and miners are always needed for the blockchain to work.
Exchanges
Established crypto are listed in most of the exchanges while the smaller ones are available only on a few exchanges, limiting their exposure to investors. Being listed in more exchanges means that more potential investors can buy it and increasing demand brings the price up.
Regulations
Regulations could make cryptocurrency more centralized and this has a big impact on the price.
These the factors you should examine in deciding which cryptocurrency to invest in or add to your digital portfolios as far as valuation is concerned. The other elements you should put in consideration in your decision-making process are:
• Investing only what you can afford to lose;
• Doing your own research (DYOR) on a new token;
• Understanding the pros and cons;
• Looking at the potential it could bring.
Once you’ve decided and got the tokens you want, make sure you keep your coins secure. Use crypto wallets to store most of your crypto and just leave enough in the exchange for immediate transactions. If you have Monero (XMR) tokens, store them in a free secure, private, and untraceable wallet like XMRWallet, which allows you to use Monero without requiring you to download any software. Go and create your account now and take advantage of everything XMRWallet offers. Using XMRWallet for your Monero coins will expand the privacy and anonymity that Monero provides.
