How Does Cryptocurrency Gain Value?

Highs and lows in the crypto world come as often as Elon Musk’s changing opinions on X. But if you’re part of the crypto world, you cannot simply remain ignorant about cryptocurrency value.  

As difficult as it is to determine, cryptocurrency value is now a strong contender in the world finance market with renowned individuals and organizations connecting and investing heavily in them. 

Whether you’re in awe at the existence of a currency with God-like features (like you know it’s there, humanity is pouring wealth on it, but you can’t see it) like I am or you’re one of those who actually have the connection with this phantom currency (like you have it on your investment portfolio) through your wealth or tech-savviness, mapping the cryptocurrency value is important for all.

After all, this value now has a real impact on the market and its trends. 

Hence, we’re here. In this piece, we’ll discuss all about cryptocurrency value and explain cryptocurrency price fluctuations using the different factors that affect it. 

Factors Influencing Cryptocurrency Value

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Cryptocurrencies acquire their value through the interplay of several market factors. These factors both determine and fluctuate their value, a system similar to fiat currencies. However, what makes cryptocurrency value different is its distinct interactions with these market factors. 

So, without further ado, let’s dissect each of these market components and study their relationship with crypto. 

1. Supply & Demand 

The crypto ecosystem is much like the pagan system of gods and goddesses. There are multiple cryptocurrencies and each one of them behaves differently and has its distinctive characteristics. 

When we talk about supply and demand, the first thing you must note is that while some cryptocurrencies like Bitcoin, Litecoin and others have a finite supply, others like Ethereum and Monero have an infinite supply.  

Supply 

Coming to the supply part of cryptocurrencies, finite or infinite, depends on several factors such as mining rewards, token issuance schedules, and the total circulating supply. With these factors comes the idea of scarcity.  

For finite coins, although miners bring new cryptocurrencies into existence as rewards for their mining activities, the amount of coins earned keeps decreasing with methods like halving (that occurs every 4 years later) to manage the supply. 

For finite supply coins, cryptocurrencies like Ethereum use token burn mechanisms that decrease the circulating supply of ETH, building up its demand. 

Demand 

When it comes to demand, it isn’t very different from how it works in the fiat currency world or any other product in any market system. Higher demand leads to price hikes that is then met with higher supply (when more people want to sell their crypto assets due to high market price) finally leading to lower demand and a fall in cryptocurrency value. 

In the case of crypto, the power to drive demand lies significantly in the hands of both retail and institutional investors, an interesting factor symbolizing the core feature of a brave new world, with decentralized economies. Nevertheless, even this world comes with its limitations the most significant among them being triviality.

Due to decentralized power in the crypto ecosystem, cryptocurrency value and investor interest can easily fluctuate with the slightest stir in media coverage, endorsements, social media trends and the words and actions of Trump and Musk. 

All these lead to market sentiment creating either a bullish environment or panic selling ultimately decreasing its demand. This new era financial system functions greatly on FOMO (Fear of Missing Out), a factor that yet again allows me to draw parallels with the idea of God. 

One practical aspect of cryptocurrency demand is its use cases. Due to their virtual presence, it is more likely for forward-looking investors to be interested in assets that have real-world usages like Bitcoin’s ability to provide banks for the ones excluded from the centralized banking systems and Ethereum’s role in setting up dApps and P-2-P networks. 

2. Market Liquidity 

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Liquidity in the crypto world is similar to what it means in the real world, the ease of buying or selling an asset without affecting its market price.

However, the crypto market does not run according to the traditional trading hours. This is another unique aspect of this financial tool that differentiates it from fiat currency and provides cryptocurrency value with great liquidity opportunities. 

Nevertheless, getting back to the paganism parallel, different cryptocurrencies have different liquidity rates. But another unique aspect of these assets is that the liquidity rate of a cryptocurrency also varies depending upon which exchange you’re choosing.

Each exchange represents a parallel universe in the crypto world with different price sets and trading pair rates for the same asset. These crypto exchanges determine cryptocurrency value using different techniques such as price-to-earnings ratios, discounted cash flow (DCF) or network value-to-transactions (NVT) ratios.

The values at the end differ due to regional factors, their specific fee structures and the demographics and trading behaviour of investors on each platform. Before choosing a particular platform, it is therefore important to understand the crypto exchange and its liquidity factors.   

Varying liquidity in the crypto market leads to price spillage and trade execution speed, ultimately leading to market volatility.  

3. Regulatory Environment 

The crypto market is fragile. Hence, any slight regulatory update can have an unfathomable impact on the market, even leading to the elimination of a certain cryptocurrency. Nevertheless, a decentralized system cannot function without regulations as it is the only way to maintain integrity and safeguard your wealth. So, no matter how anxious this factor makes you about high volatility and uncertainty, you cannot do away with regulations. 

As we are currently navigating the 2025 crypto world, a series of new directives have been shaping this asset class and giving it new forms almost every day. Some of these changes include the diverging US and EU approaches where the Trump government is all set to roll out the new executive order which is in direct conflict with the EU’s MiCAR.’ 

Moreover, there are legislative initiatives, such as the Financial Innovation and Technology or the 21st Century Act (FIT 21) that impact the cryptocurrency value greatly, enhancing trust through technological updates.  

All in all, we can say that the crypto world is ever-evolving with newer regulations shaping how market sentiment affects crypto prices. 

Keeping Up With Technology 

Cryptocurrency builds for us a cyber-punk world with technology at its core. Hence, this market is ever volatile as technology and innovation never stop growing. With AI integration and Layer-2 solutions, we are hoping to finally free finance from any centralized control. 

But not to forget, as we already mentioned, our brave new world will not be without limitations. Nevertheless, every change comes with the hope of gaining value and not changing value.

With that idea as its crux, our basic digital asset, the cryptocurrency can also gain value through the interplay of society, humans, their fear and control, political power plays, new world ethics and regulations and of course, its heart, technology and innovation.