What determines the value of SBD, STEEM and other cryptocurrencies?
You know I had been thinking about this thing like what determines the price of Steem and cryptocurrencies in general. And believe me, I got an eye-opener that I will love to share with you.
Source
Investing in a cryptocurrency like Bitcoin and Steem can be very heart aching because of the relative inability of investors to monitor or predict the prices or even at least maintain it for a while, taking Steam for example
Just over a month ago it was almost at an all-time low, at least for me as I saw it go for as low as 1.2USD and not long afterward it rose to about 3.7USD and just over a week later as we speak it is at about 2.2USD.
Really?
Some analysts are not too concerned with suchvolatility, however, seeing in it a natural lifecycle of cryptocurrency stock. In fact, Tom Lee of Fundstrat Global Advisors predicts that
by July 2018, Bitcoin will be back up to $20,000 and reach $25,000 by the end of the year. He finds that judging by historical performance, it takes Bitcoin about 85 days “to recover prior highs” after a period of bottoming out.
Vitalik Buterin, the founder of the cryptocurrency Ethereum is less bullish. >He warned last week that such currencies are really not the best place to put your life’s savings since they are new and “hyper-volatile,” with the possibility to “drop to near-zero at any time.” Instead, “traditional assets are still your safest bet,” added Buterin.
Our financial institutions are not really helping either as they tend to fear the stiff competition that these currencies come with and they are fighting tooth and nail to make sure these crypto fail woefully. In early February, major banks like Bank of America, JPMorgan, Citigroup and UK’s Lloyds stopped allowing credit card purchases of cryptocurrencies.
The price of Steem and other cryptocurrencies should be determined by normal demand and supply right?
Emm... not exactly as Fortune magazine’s Jen Wieczner says,
Bitcoin is also affected by hype. Other stocks aren’t generally so impacted by that.
How does this hype thing work?
Well, all it does is basically get the word about and attract more investors to the coin and as they keep coming, the price keeps skyrocketing because the demand is increasing until it gets to a point where it gets overinflated and thus settles itself with another downhill trend following patterns of record growth and highs by downturns and valleys. Similarly to Tom Lee, Wieczner thinks
That there are market adjustments where the price goes about 20% down after the cryptocurrency hits a new high.
Another effect on the price comes from the fact that crypto is digitally minded are digitally mined. There is potentially a limitation on the number of steem that can be mined. This implies that when the mining capacity of the coin is reached there will be no more of the coin to mine, This can create a scarcity of Steam potentially driving its price even higher.
What we just did was observe how to predict or rather know the determining factors to why Steem either falls or rise in price. Like I said this was a personal research of mine because I was kinda lost a bit as to why these trends occur, I know there are volatile and unpredictable but I wanted to know why and maybe I did and you two did.
My major concern is about the first reason for the fluctuation in price which is HYPE in other words, promotion or talking about it.
Lately, I have been a bit concerned about the level of publicity we have been giving this platform and assessing the views of experts am quite sure we can all agree that we have a part to play to make this price skyrocket. And it is not that hard. Just tell someone about it.