Cryptocurrencies are still as popular as ever, with a recent estimated 420 million users worldwide and 39,000 Bitcoin ATMs. Since Bitcoin’s first listing 13 years ago, as of February 2023, CoinMarketCap now tracks 8,000 cryptocurrency tokens and coins, across hundreds of individual blockchains—creating a market worth over $1 trillion today.
But what makes a coin or token go up in value? How can you know what crypto to buy or sell, or which may have a sustainable road to growth? Often, they reflect the underlying functionality and usage of the blockchain network or project to which they are associated, but in this article we look at six key things that make a cryptocurrency go up.
For transparency, AmazeWallet uses the AMT token on our mobile-native chain.
1. Market Demand and Adoption
One of the primary factors that can cause a cryptocurrency’s value to rise is increasing market demand and adoption. As more individuals and institutions begin to accept and use a particular blockchain or project, the utility and value of the cryptocurrency tend to grow. A growing user base can lead to higher trading volumes and liquidity, which in turn attract more investors seeking to capitalize on potential gains.
For instance, when a cryptocurrency gains real-world use cases, such as enabling faster and cheaper cross-border transactions or supporting decentralised applications, it becomes more attractive to both users and investors, thus driving its price upwards. This may be reflected in the number of partnerships, number of users or holders, businesses using the currency, or decentralised applications built on the chain.
For example, the famous sports brand Nike are working with a blockchain platform AntChain, Starbucks has issued NFTs on Polygon, and even Walmart have announced a move to use Distributed Ledger Technology.
These types of projects can show that the chain is well-established and more likely to have long-term support, which can be reflected in the value of the token or currency.
You can check the price of most tokens or coins using websites like CoinMarketCap and CoinGecko, or at the particular centralised or decentralised exchange (for example, Binance, Uniswap or KuCoin) that the token is listed and traded on. AMT is currently listed on BitMart and Coinstore, and we have already secured several partnerships with Web3 brands such as 1inch and Bitcoin.com–with more offline usage to be announced soon.
2. Currency Utility
Besides the utility of the chain or project, more use cases for the currency itself can also create more demand. Some cryptocurrencies serve as governance tokens only, while others, such as stablecoins, are often used as a medium of exchange within Web3 to swap between tokens.
The number of potential use cases means more potential for regular transactions. Tokens which are used to pay the network fee (often called the gas fee), have more utility since they are required anytime a transaction occurs on the underlying chain–even if it is for a different token or dapp.
Cryptocurrencies like Ethereum are used for smart contracts, with a number of applications using the underlying blockchain (and therefore using the native ETH currency for transactions).
Others, like our own AMT, are both used to pay gas on the chain, as well as to become a miner to run a node, like ADA on Cardano, as well as for use within the app ecosystem, for NFTs, real-world online and offline usage, and to pay fees and commission.
3. Scarcity and Supply Dynamics
Scarcity plays a pivotal role in driving up the value of cryptocurrencies. Many coins or tokens are designed with a limited supply, often capped at a certain number of coins, like 21 million in the case of Bitcoin or 200 million in the case of AMT. This scarcity mimics the attributes of precious metals like gold and silver, creating a sense of digital scarcity that can lead to increased demand and subsequently higher prices. Some currencies, like Ethereum, have an infinite supply.
This scarcity is often seen as a hedge against traditional fiat currencies susceptible to inflation.
It is important to know the circulating supply and total supply for any cryptocurrency. Tokens which are issued at the token generation event usually provide the circulating supply, and may be added to by process of mining or validating—like AMT—or by being unlocked by the project team. It is important to consider a project’s tokenomics, the schedule when tokens are released or locked-up, as well as possible events such as a block reward decrease or token burn mechanism.
4. Technological Developments
Technological breakthroughs can significantly impact a cryptocurrency’s value. Upgrades and improvements in a cryptocurrency’s underlying technology, security, and scalability can attract more interest from both developers and investors.
Blockchains and protocols that can demonstrate entirely new technology such as better throughput, new DeFi algorithms, an innovative consensus mechanism, the integration of privacy enhancing features, or innovative smart contracts, can be reflected in the price of a cryptocurrency. Look for networks that have in-depth whitepapers and a GitHub entry which demonstrate their new technology, as well as a robust development team, rather than simply a clone or copy ofa previous project’s code.
After Bitcoin, the first-generation blockchain, there have been several EVM-compatible smart contract chains such as Ethereum and Avalanche. AMT is the currency for AmazeChain, a mobile-native chain that uses smartphones to verify transactions and create blocks. Our GitHub is available here.
5. Market Sentiment and Hype
The crypto market is highly influenced by investor sentiment and speculative activity. Marketing campaigns, positive news, brand partnerships, endorsements from famous or influential figures, and a social media buzz (lots of posts/mentions) can create a sense of hype around a particular cryptocurrency, leading to a surge in demand and subsequently driving up its price. It is important to note projects may use bots or fake accounts to drive such online activity.
You can often find trending cryptocurrencies discussed in online forums including Reddit, or shown on popular YouTube channels related to crypto and blockchain.
However, it’s crucial to note that market sentiment works both ways; negative news or regulatory crackdowns can lead to sudden price declines. Therefore, investors should exercise caution and conduct thorough research before making investment decisions.
6. External Factors and Global Events
Cryptocurrency markets are not isolated from the global economy. External factors such as macroeconomic trends (including inflation), geopolitical events, and regulatory developments can significantly impact the value of cryptocurrencies. For instance, announcements of countries legalising or adopting cryptocurrencies can lead to increased demand, while regulatory uncertainties can result in price volatility.
Conclusion
There are a number of factors that can contribute to the value of a cryptocurrency going up. Market demand, utility, adoption, scarcity, hype, macroeconomics will all play a part. Over the last 10 years, the cryptocurrency market has seen fluctuations both up and down.
As with any purchase, a deep understanding of these factors, coupled with diligent research and risk management, is crucial to make good decisions and ideally find a cryptocurrency ecosystem that can grow. At AmazeWallet, our AMT token is the fuel to our long-term sustainable roadmap—used by every miner, user, creator and builder. Don’t miss out on the next generation of blockchain!
