How Does Cryptocurrency Value Increase?

28 AUG 2021
2 min read
Cryptocurrency markets are extremely volatile, with significant value swings frequently occurring over relatively short time frames. We've all heard of crypto-billionaires who made headlines by investing heavily in cryptocurrency, just as we've heard of those who lost everything.

Since cryptocurrencies have neither a central authority nor a tangible commodity, it's difficult to predict when their value will rise. So how does cryptocurrency gain value? In this article, we'll go through the factors that directly affect cryptocurrency value, so be sure to read to the end.

What Is Cryptocurrency?

In the simplest sense, it is a digital asset. It was created to serve as a medium of exchange, just like fiat cash, which is why it is termed a currency. All the transactions take place online and are recorded in a blockchain. Blockchain technology is a distributed ledger that records and displays cryptocurrency transactions and establishes the ownership of each one.

Since cryptocurrencies are decentralized, they provide benefits such as no processing charges and less government control. This translates to inflation resistance, transaction transparency, and portability.

What Are Types Of Crypto?

Surely, the cryptocurrency value increase is one of the major concerns of investors, considering that there are more than 3000 different cryptocurrencies available. And all of them come with significant differences, even though their underlying infrastructure is blockchain-based. Nevertheless, there are currently three major classes of cryptocurrencies – Altcoins, Tokens, and Bitcoin. The specifics of each of these crypto types are covered below.
Bitcoin, the first cryptocurrency, has a cap on its value. This implies that mining will cease once 21 million Bitcoins have been created. Due to its limited supply, Bitcoin may serve as a hedge against inflation. Buying a currency that will retain its value over time is similar to gold investment.

The mining process for Bitcoin is based on the Proof-of-Work algorithm. This implies that the Bitcoin blockchain relies on a distributed network of miners to perform intricate calculations to maintain the Bitcoin blockchain. Newly created Bitcoins are given to miners as payment for their labor. Bitcoin's transactional system can be given a tangible value thanks to Proof-of-Work. Each Bitcoin is equivalent to a particular level of hashing power.
How does cryptocurrency gain value
Technically, altcoins are just slightly modified Bitcoins. They are often caused by a Bitcoin fork. When comparing Bitcoin and other cryptocurrencies, the blockchain is where you'll find some of the most significant distinctions. In contrast to Bitcoin and other finite-supply currencies, the supply of certain altcoins is unlimited. Some altcoins have accelerated the blockchain, resulting in faster mining and transactions.

The transaction authentication methods used by various altcoins might also vary. Some alternative cryptocurrencies, such as Bitcoin, employ Proof-of-Work systems, while others use Proof-of-Stake systems.

Smart contracts can also be produced using altcoins. Depending on certain conditions, these smart contracts may execute themselves automatically. There is no need for a third party to be involved, and they can be completed immediately. Smart contracts can be used in a variety of transactions, including real estate.
Tokens have been developed for use with smart contracts or as a medium of exchange. They lack a blockchain and are utilized on decentralized applications (dApps).

Cryptocurrency coins use the blockchain created by the mining process as a physical representation of the currency. This is comparable to the way Reserve Banks supported their fiat currencies with gold reserves in the past.

On the other hand, tokens don't represent any actual objects. They are becoming more and more well-liked since they may be used to make purchases from dApps and to receive lowered fees and voting fees. The uncoupling of fiat money from the gold standard may serve as an analogue.

How Does Cryptocurrency Gain Value?

To have a clear understanding of what makes cryptocurrency go up, one must look deep into several factors. Cryptocurrency value increases are dictated by the age-old law of supply and demand. Digital assets have little value in the absence of demand. However, the reasons for demand can differ.

If the blockchain is useful, it can quickly develop a community. When a new coin gains traction in the market, it devalues the existing coin. As a result, if a coin provides value and is useful, its price may rise.
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What Do You Need To Know About Crypto Trading

Trading cryptocurrencies involves making predictions about their future price movements using a CFD trading account or using an exchange to purchase and sell the underlying coins. It is similar to stock trading, where participants buy and sell crypto tokens. You become a shareholder in the corporation when you purchase a share. On the other hand, purchasing a cryptocurrency makes you the legal owner of that specific coin.

So how does cryptocurrency value increase with trading? Since cryptocurrency's value is primarily influenced by supply, market demand, accessibility, and competition, traders may increase it by decreasing its availability on the market.

▶️Supply And Demand

Mining new coins and the willingness of the owners to sell them to new buyers determines the supply. Whereas, the demand depends upon numerous circumstances. One reason is that a cryptocurrency's utility raises the demand for it. In other words, if businesses start using the blockchain network and adopting the native coin, the demand for that specific cryptocurrency will increase. This is because smart contracts are available on the blockchain, transactions on the network are processed quickly, and fees are minimal.

So, to answer the question of "how do cryptocurrencies gain value?" - their value is determined by the supply and demand aspects outlined above. The fluctuating supply and demand also have an impact on the crypto price.

▶️Cryptocurrency Exchanges

The most well-known cryptocurrencies, like Bitcoin and Ether, are traded for other cryptocurrencies on many exchanges. It's possible that the smaller tokens are only available on certain exchanges. If a cryptocurrency is listed on more exchanges, investors will find it easier to buy and sell. This can increase demand and limit supply, which in turn will cause a cryptocurrency to increase in value.

Cross-chain bridges allow users to trade between different cryptocurrencies. It's very much like the trading of foreign currencies. Several inter-chain connections make it easier to travel between several blockchain environments.

The aforementioned elements have been crucial in determining what makes cryptocurrency go up.

How Does Cryptocurrency Value Increase On The Market

Cryptocurrencies are often decentralized and not supported by private companies, organizations, or governments. Thus, the value of cryptocurrencies is dependent on the internal and external factors that are discussed in the paragraphs below.

▶️Coin Supply

As the degree of difficulty in obtaining an item increases, so does its value. The same principle can be applied to cryptocurrency. Generally speaking, the value of a cryptocurrency will increase if it has a limited supply and can attract a large user base. Many cryptocurrencies have unique mechanisms to control supply. The so-called "burning event," in which coins are intentionally burned to restrict their availability and drive up prices, is the most prevalent.

▶️Successful ICO

Companies use the ICO (Initial Coin Offering) approach to raise money by selling new digital tokens and cryptocurrencies to investors. A cryptocurrency's value increases when it is released to the public, albeit this heavily depends on how viable and profitable the token idea is. Once the currency is released into circulation, its value will rise in proportion to market demand.

Successful ICO comes with multiple advantages. Prices are often lower because you're buying early, and some ICOs offer tokens at a discount. Moreover, anyone can participate in an ICO. In contrast to some IPOs, there are no restrictions on who can invest. Overall, ICO is a quick and efficient way for start-ups to raise capital and for cryptocurrency value to increase on the market.

▶️Legal Requirements

Aside from supply and demand, the internal governance of a cryptocurrency also influences its value. Crypto networks, on the other hand, do not follow a set of rules. The projects are created based on the needs of the community.

A few tokens are also known as governance tokens, as they grant the ability to vote on the project's future, including how it is used or mined. Stakeholders must reach an agreement to determine what changes the governance of a token must undergo.

Investors, without a doubt, seek coins with stable governance. A slow software updating process, on the other hand, can have an impact on the value of a coin. However, an update that takes months to implement may be detrimental to the current stakeholders.


There are literally thousands of cryptocurrencies available on the market, and more appear weekly. This demonstrates how simple it is for new entrants to come onto the market. Nevertheless, the true difficulty is in developing a trustworthy cryptocurrency and fostering a community that adopts it.

If the blockchain has real-world applications, it has the potential to attract a sizable user base, particularly if it can solve problems that have stymied similar cryptocurrencies. If a competing cryptocurrency has rapid growth, it will eat into the market share of the established coin's value. Therefore, if a currency has true use and is providing value, this is what makes crypto price go up.
What makes cryptocurrency go up

▶️Market Capitalization

The market capitalization of a coin is a simple measure of its worth on exchanges. To calculate a coin's market capitalization, investors multiply its current price by its supply.

Now, let's take a look at a real-world application. Consider the hypothetical cryptocurrency Coin A, which has a market valuation of $600,000 based on its current supply of 200,000 coins. For comparison, let's say Coin B has a supply of 100,000 and a value of $4 per unit. The market cap would then be $400,000 in total.

While Coin B has a larger market worth per coin, the sum of Coin A's value seems considerably greater. Because of this, the coin market cap index is a more accurate reflection of the value of a cryptocurrency. Cryptocurrencies with larger market caps often appeal more to investors because of their higher valuations. So, the market cap causes a cryptocurrency to increase in value.

▶️BTC Price

Bitcoin was the first cryptocurrency of its kind, and until today, it remains the most widely used. That is why crypto markets are highly correlated with Bitcoin. When the value of BTC, the largest cryptocurrency by market cap, rises, the value of other digital tokens rises as well. When BTC falls, other players in the space will likely follow suit. Most altcoins trade in either a downtrend or an uptrend against Bitcoin.

▶️Perceived Value Of The Project

One of the primary reasons why cryptocurrencies' values fluctuate so dramatically is the perceived storage value they have over traditional currency. When comparing fiat currency with cryptocurrencies, it is clear that the former is subject to government oversight. Certain organizations work to keep unemployment rates low and prices stable. As a result, economies based on fiat currencies may be either robust or feeble.

Individuals' motivation to invest in cryptocurrencies is mostly influenced by their estimation of how cryptocurrency is valued. Therefore, the value judgments of the market are what drive the cost of cryptocurrencies.

Technological Factors That Make Cryptocurrency Go Up

Some technological criteria may be used to represent what makes crypto prices go up. Let's go over these factors one by one below.

▶️Cost Of Mining

You've undoubtedly heard that mining is the process through which new crypto units are created. In order for cryptocurrency to function as it does, a decentralized network of miners is required. That's why the protocol generates cryptocurrency tokens as incentives.

If the cost of production rises, it also causes a cryptocurrency to increase in value. This occurs when the number of computers mining it grows or when the mining reward decreases.

Miners will not participate in the creation of a new cryptocurrency if the reward is not sufficient to cover the expenditures involved. Remember that speculative demand can also be a factor in increasing the price of a crypto unit. The more money speculators spend on a coin, the more minors will be involved in the cryptocurrency creation process.


Will you purchase a product if there is no practical use for it? While some may be tempted to ride the wave of attention around a meme currency, most savvy investors would never do so. This is when a crypto asset's practical use comes into play, providing additional value to its owners. Ethereum, with its network that allows more than half of all cryptocurrencies to function and fulfill their transactions, is the best illustration of practicality in the cryptocurrency sector.

Because of its widespread usefulness, many other cryptocurrencies would be rendered obsolete in their absence. Other crypto assets may provide consumers with utility by making the currency lucrative and useful inside a certain ecosystem, platform, or chain. They may utilize that system to reward users for staking, burning, voting, or even keeping that specific asset, which will increase the asset's usefulness.


Most cryptocurrency investors can't get their hands on a coin until it's listed on a cryptocurrency exchange. Each project has its own contract address, which may be listed on a DeFi exchange so that it can be purchased anywhere. However, the complexities involved in this process make it less than ideal for novice crypto users and investors. For this reason, it is vital for every cryptocurrency to be listed on several major cryptocurrency exchanges. Over time, this has a dramatic effect on how cryptocurrency value increases.

When a cryptocurrency exchange registers a cryptocurrency, it purchases a large quantity of that cryptocurrency to ensure its customers have access to deep liquidity for their investments and trades. The value of the coin also rises as a result of this.

▶️Technological Improvements

The value of several cryptocurrencies rises as a consequence of innovations in related infrastructure or advancements in related technology. How does cryptocurrency gain value because of this? Changes in the protocol, like hard or soft forks, may generate interest in a currency and influence how investors see it. Both Bitcoin and Bitcoin Cash saw extreme volatility after the schism in the blockchain in August 2017, yet their values also reached all-time highs.

However, it's important to keep in mind that not all improvements result in monetary gain. The value of Cardano's ADA token increased by around 22% in August 2021, when it was announced that the platform would soon release a smart-contract upgrade. This update marked a significant step in Cardano's roadmap because it would enable the use of Plutus to power smart contracts. The Alonzo hard fork in September had a subdued reaction, and as a result, its implementation had a negligible effect on the value of ADA. On September 10th, after the Alonzo hard fork, the price of ADA fell about 10%, to a low of $2.30 throughout the trading day.
how is cryptocurrency valued

Other Factors How Does Cryptocurrency Gain Value

Cryptocurrency gains or loses value due to a number of other variables. They may not seem like the most critical ones at first glance, but they still have a certain impact on the crypto price. The most noticeable ones are highlighted below.


Many celebrities from the realms of business, sports, and entertainment have been lucky enough to get their hands on the now-famous coin. The most popular names are Elon Musk, Jack Dorsey, Mike Tyson, Maisie Williams, Mark Cuban, Snoop Dogg, Steven Seagal, etc.

The Dogecoin case is a great example. Although the coin's inception was meant to be humorous, its fortunes have substantially improved thanks to Elon Musk's tweets. After his first tweet on Dogecoin in December 2020, which just said "One Word: Doge," the price of Dogecoin increased by 20%. After Musk tweeted "Dogecoin is the people's crypto" and "no highs, no lows, just Doge" in February 2021, the value of the cryptocurrency increased by over 40%.

Therefore, the influence of celebrities on cryptocurrency's value is difficult to underestimate when only a single tweet can boost the entire market.

▶️Media Popularity

You can't address the topic of how cryptocurrency gains value without discussing the media. The press has an undeniable sway on the fortunes of virtual currencies. Investors' emotions and goals are largely shaped by the media.

There is a correlation between how cryptocurrencies are written about or presented and the level of demand they get. Virtual currency prices tend to rise in response to the widespread dissemination of good news in the media.

However, if the media chooses to disseminate negative information, it will force investors to flee the market in fear. This might cause dangerous drop-offs if it continues. Public acceptance and knowledge of cryptocurrencies may greatly benefit from media coverage of the topic. As a consequence, prices will rise dramatically.

▶️Community Involvement

The size of the cryptocurrency community is a key factor in determining the currency's value. A cryptocurrency's value rises in proportion to the number of individuals who own it. More people are using digital currencies so that more businesses can accept them as payment.

Final Thoughts

When considering an investment in cryptocurrencies, it's important to determine how cryptocurrency gains value. Assets may increase or decrease in value with startling rapidity in the volatile world of cryptocurrency. Supply and demand, manufacturing costs, exchange availability, legal regulations, and celebrity endorsements are just some of the many elements that affect the value of a cryptocurrency.

Therefore, keep an eye on long-term value and mass adoption, which could have far-reaching effects on the future of cryptocurrencies if the volume of crypto transactions rises while volatility settles.

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