What does market value mean?
The market value is the price one is willing to pay for an item at a given moment in time. If a certain cryptocurrency costs one thousand dollar per coin, that’s its market value.
The entire cryptocurrency market is worth a lot of money. The total value of all cryptocurrencies was 125.5 billion dollars on January 1st, 2019. At the start of 2018, the market reached an all-time high; the entire crypto market was worth a whopping 813 billion back then.
The market value of cryptocurrencies is still volatile, it could move up or down at any second.
Volatility arises because traders, investors, and other parties are constantly speculating by taking a position on the price.
How is a cryptocurrency price determined?
The market value is determined by two important factors: speculation and adoption.
- We already briefly discussed speculation. Speculation means nothing more than individuals and parties trading coins to benefit from a price increase or decrease.
- Adoption however is a much more interesting factor. The adoption of a certain cryptocurrency increases the intrinsic value of that coin. When more people or organisations use a specific technology, the intrinsic value increases.
There are over two thousand different cryptocurrencies. Many of these coins (and accompanying projects) offer completely new and unique solutions. But with two thousand different coins, it’s inevitable that some coins promise the same thing and are competing for a piece of the market. The ability to live up to the promises made determines the adoption and, in the long run, its value.
A good example of a coin that experienced both a lot of speculating as well as adoption is Ether, the coin that is used on the Ethereum blockchain. It’s quite simple to build a new cryptocurrency on the Ethereum protocol, which was often done in 2017 through ICOs. Investors could only participate in an ICO when they paid using ether. That’s what made the value of ether rise from 7 dollar to 770 dollar!
The market is always open
What’s important to know is that investing in cryptocurrencies is quite different from investing in shares or stocks. Almost all trading, 99 percent, is done on online exchanges that have no opening or closing time. This means the cryptocurrency market is always up and running, 24 hours a day, 7 days a week.
Would you like to know if a specific coin has the potential to gain intrinsic value? Make sure to do your own research before you start investing, for example by visiting the website and reading the white paper.