Cryptocurrencies are digital, virtual, and alternative currencies to the ones we’ve used for centuries. Cryptocurrencies, unlike electronic currencies, government-issued and banking institutions, are decentralized.
The control of this decentralized structure is also carried out by blockchain transaction databases. The rapid expansion of its market has become a phenomenon in recent years, attracting the interest of numerous investors. There are over 12000 cryptocurrencies; the large number can be explained by the fact that there are only a few entrance barriers to launching them. Some cryptos gain value faster than others.
What are crypto trading fundamentals?
Crypto trading fundamentals assess an asset’s inherent value, which is intended to be a measure of its worth. The underlying data of crypto projects can be used to determine if the coin is undervalued or overvalued.
Cryptocurrencies are typically volatile. Even well-known names like Bitcoin and Ethereum are susceptible to unexpected price changes. Investing in newer currencies and tokens carries a high risk of losing money unless you know what you’re doing. By looking at the crypto trading fundamentals, we can see how they gain value which is a big factor when trading.
How does crypto gain value?
Competition
Because there were few players in the early days of the cryptosphere, Bitcoin was able to profit from a general lack of competition. Bitcoin accounted for more than 80% of the total market capitalization of the crypto market in 2017. Right now, with over 12000 cryptos, Bitcoin has a market valuation of 41% of all crypto markets. This has affected its price since investors have other options.
Another example is Ethereum, which has grown to become the most widely used blockchain network with a variety of applications since its inception in 2015. Ether has arisen as a competitor to Bitcoin as a result of increased interest in decentralized finance (DeFi) tokens. While the variety of uses for Ethereum has influenced its price, it now faces competition from the likes of Binance Smart Chain, Cardano, and Neo. In addition, Ethereum is rivaled by Solana, which offers faster transactions at a lower cost.
Supply and demand
Some people want a coin in order to use its network. They intend to use the network to play blockchain video games, exchange tokens, invest in DeFi apps, and so on. However, every time a user submits a transaction, they must pay a gas fee, and the majority of the crypto used to pay this fee is destroyed in the process. If the number of transactions on the network increases, the coin’s price will tend to rise as a result of the increased demand from users.
The supply of an asset is crucial in determining its price. Something that is rare will almost certainly be worth a lot more than something that is generally available. Bitcoin’s protocol has allowed new coins to be minted at a certain rate since its creation, which has slowed with time. Bitcoin halving events, which happen every four years, roughly coincide with a substantial price gain because they suggest a drop in supply.
Celebrity endorsement
Dogecoin is a good example of this. The coin was designed as a joke, but its fortunes increased drastically as a result of Elon Musk’s comments. “One Word: Doge,” he tweeted in his first Dogecoin-related tweet in December 2020, following which Dogecoin’s value increased by 20%. Musk tweeted an image of Joan Miró’s painting “Dog Barking at the Moon” with the phrase “Doge Barking at the Moon” a few months later. Dogecoin’s value rose by 100 percent.
Matt Damon, a famous Hollywood actor, is promoting Crypto.com, a Singapore-based cryptocurrency exchange that just spent $700 million to brand the Los Angeles Lakers arena with its name. Charli D’Amelio, a TikTok celebrity, promotes the Gemini exchange, and Kim Kardashian promoted the EthereumMax currency to her 276 million Instagram followers in May last year. They all gained value as a result of the endorsements.
Innovations in technology
New updates of blockchain boost the value of many cryptocurrencies. The price of Ether rose before and after the London fork in August 2021, which was one of the most significant improvements to Ethereum’s network in its six-year history. The value of Ether was boosted by bullish traders in the weeks running up to the London hard fork, and it increased by 8% after the network update.
Similarly, the forking of Bitcoin’s blockchain into Bitcoin Cash in August 2017 resulted in tremendous volatility but also new highs for both coins’ valuations. Also, word of Cardano’s impending smart-contract upgrade, a major milestone in its roadmap that saw the launch of Plutus-powered smart contracts, boosted the value of the ADA by around 22% last year.
Crypto whales
Whales are people who buy and hold a large number of coins of a particular cryptocurrency. For Bitcoin, one can hold up to 1000 coins, while the altcoins limit is usually higher. Elon Musk is rumored to be a Dogecoin whale after two days of hefty transactions totaling around 6.3 trillion Dogecoins in October 2021.
Roger Ver is one of the most well-known Bitcoin whales who began his journey in 2011. Since then, he’s worked for a number of companies, including blockchain.com, Kraken, and Ripple.
Whales try to pique other investors’ interest by inflating prices, and these investors then get concerned about missing out on the boom, thus purchasing the coins. This makes the crypto gain value.
Summary
In recent years, the rapid growth of the crypto market has become a phenomenon, capturing the attention of a large number of investors. Crypto trading fundamentals examine an asset’s inherent value, which is meant to be a measure of its worth. Several things influence the value of crypto, including whales who acquire large amounts of coins, celebrity endorsement, technology innovations, and the law of supply and demand.
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