DeutschWhat is the Value of Cryptocurrencies?
Cryptocurrencies are independent digital currencies that are intended to serve payment transactions. Nevertheless, it is the case that a conversion into classic central bank money, such as the Swiss franc or the US dollar, is necessary to evaluate the individual cryptocurrency. This is the only way to speculate with cryptocoins (How do I speculate with cryptocoins), namely when their value can be expressed in a central bank currency. This is how you can quantify the value of cryptocurrencies.
How is the Value of Digital Currencies Formed?
First of all, every new digital currency placed on the market is worthless in principle. A value is only formed when demand arises, i.e. someone wants to buy the cryptocurrency. This continues seamlessly in the following period, so that the value development depends on the ratio of supply and demand. If more people want to buy the corresponding cryptocurrency than coins are to be sold, there will normally be an increase in value.
You are certainly familiar with this principle from many other markets and financial products, for example with shares on the stock exchange, where supply and demand also determine the price development. The fact that supply and demand are responsible for the value development of cryptocurrencies is clearly evident in the current phase. Digital currencies are currently extremely in demand and popular, so there is currently a real boom. As a result, the prices of many cryptocurrencies are literally exploding because demand is significantly higher than supply.
Very Different Values of Cryptocurrencies
When we talk about the value of cryptocurrencies, we should also take a look at the fact that the individual digital currencies can differ significantly in their value from each other. This is shown, for example, by a look at three of the best-known and largest cryptocurrencies in terms of market volume with their corresponding current value:
- Bitcoins: approx. 16,700 Swiss francs
- Ethereum: approx. 710 Swiss francs
- Litecoin: approx. 300 Swiss francs
The Bitcoin, for example, currently has an almost 24 times higher value than Ethereum and even around 55 times higher than the Litecoin. Incidentally, the valuation of the cryptocurrency also plays a role in how many coins are already in circulation and how many coins of the respective cryptocurrency can be generated at all. With almost all digital currencies, the possible volume is limited, such as the Bitcoin to a maximum of around 21 million coins.
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