Cryptocurrencies act as a unit of exchange and a place where one can store assets without relying on any central financial institution. The value of the cryptocurrency market has climbed to new heights this year, rising more than 1200%. The total market capitalization of these digital currencies rose to $230 billion recently. The volatile cryptocurrency’s value has shifted wildly even since mid-December. Apart from the impending prospects of regulation, a series of high profile thefts have also had a hand in the sudden rapid dips in the value. As for what drove the sharp increase, analysts have pointed out the following key factors:
- Growing Interest: The increasing visibility is a major reason that digital currency market has been rising in value. The hype in the market leads to increasing traffic as more of the public strives to understand this market. Amongst this entire buzz, many people have been learning about digital currency and deciding to join in. As digital currencies rise in value, their appreciation generates an interest from the market observers and this in turn helps to further fuel the price gains.
- Increasing Investment: The digital currency market has derived some very strong inflows this year and this is reflected in the total market capital of these assets. A rising number of investors have been noted to be involved with cryptocurrencies. The investments have come surging particularly from traditional finances like hedge funds, family offices, high-net-worth individuals and even banks, pension funds and wealth funds.
- Rising number of ICOs: The increase of Initial Coin Offerings (ICOs) has caused the digital currency market to gain value immensely. First of all, because of these sales new values for the cryptocurrency market is created as tokens are sold and given monetary value. Secondly, involving in ICOs requires exchanging bitcoin, which in turn provides significant opportunity for this major cryptocurrency. It is also worth noting that bitcoin’s price has surged more than 700% this year.
- Utility: A key factor in the rise of value of any cryptocurrency is its utility. If you cannot use it for something, be it investment or payments, then it would have zero to very little value. In case of bitcoin, it is used for payments on a high and ever increasing rate, placing its utility rate at an all-time high. The changes in utility can cause price volatility.
- Supply and Demand: Much similar to the way precious metals gain their value due to utility and limited supply, the increase in the price of cryptocurrencies is also tied to supply and demand. The supply of cryptocurrencies is bought in at a constant rate and is unchangeable. This creates a supply that is limited and thus people pay more to get the coin they think have value.
With the global financial market becoming more complex than ever, easy and reliable tools are the need of the hour. Take for example, if you’re planning on buying shares from Compass group, live tracking of compass share price is the perfect solution for your financial woes therein. Much similar to this, with the crypto market rising in numbers, many analytical tools and strategies are emerging in the market, thereby easing up the burden of many investors in the process.
Conclusively, the world of cryptocurrency is here to stay. Given its revolutionary payment processing abilities and its capability to work across the globe, it shouts out all the right reasons to continue using cryptocurrency.