It might be a bit impossible to think of price without value, goods or services. Let’s take a typical experience you might have as an example. You go to a grocery store near your neighborhood to buy a colorfully packaged flour. The attendant looks at what you have picked up and you pay a certain sum to fulfill all it takes in a normal sense for you to own that particular product. What has happened is that price has made exchange successful—a situation where the two parties—you and whoever owns the grocery are completely satisfied with what has transpired. Price is essential for transfer of ownership and fair exchange of value.
Three basic factors determine the price. First, the buyer has to be willing to pay the sum fixed on a particular goods or service, the seller has to be willing to accept, and lastly, the market has to allow for such an amount to be fixed on a particular item.
In cryptocurrency, what happens is not different. People buy Bitcoin and altcoins numbering millions daily. In fact, the number of transactions in one exchange alone can reach hundreds of millions in any given week. These transactions could be either exchange of one cryptocurrency for another or exchange of cryptocurrency for fiat money. The has led to issues like scalability which has brought about entirely new systems in the crypto space vying to gain users based on providing a solution to the scalability problems of earlier blockchains.
Whenever we talk about cryptocurrencies in recent times, it often relates to gains and profit. No one wants to be left out of this new rush of crypto-millionaires and billionaires. Some things need to be understood here. Cryptocurrencies buyers and sellers are different from miners controlling nodes in the blockchain. Whereas miners get rewards for solving puzzles required to add new blocks to the network of transactions. Buyers and sellers of cryptocurrency usually benefit most of the time from an economic activity known as arbitrage. They buy coins with the hope that at some time like in December 2017 when Bitcoin reached a whopping $20,000 they would sell such coins making gains in the process. The fee in some cryptocurrency exchanges could determine the price of cryptocurrencies.
Although the forces of demand and demand and supply also goes a long way to determine the price of cryptocurrency. Speculations control the forces of demand and supply. At the time of writing this article, for example, Techcrunch reported that Bitcoin, Ethereum and other cryptocurrencies have plunged. CNBC also published that the fall in the price of cryptocurrencies have made skeptics remain in the belief that cryptocurrencies are of little value and would plummet. This may not really be the case, however. The truth about the price of cryptocurrencies is that it goes with speculation and the forces of demand and supply. In a case where many people buy cryptocurrencies, there may be higher chances that more people would come in leading to higher demand than supply which is also limited. The same holds for lower demands.
Read this latest article by Cryptocurrency Expert David Drake on the price of the Ether.
