Have you ever wondered what makes cryptocurrencies valuable? It’s even more difficult to wrap your head around why some crypto has a high price tag. It’s such a mystery because, in reality, cryptos are not physical, exist anywhere, or are endorsed by the governments.
Nevertheless, some cryptos are more valuable than fiat currencies, particularly Bitcoin, and Ethereum, amongst others. Investors buy Ethereum for several reasons, all of which are based on the value position in the crypto market. In this article, we would talk about the top 5 things that give Ether Token its value. But before we do that, let’s understand the concept of Ethereum.
What is Ethereum (ETH)?
Ethereum is the network which the Ether Token runs. Ethereum also serves as a platform where developers can build projects and provide solutions. Over the years, several projects have been based on the Ethereum network, which has made it a staple in the crypto space.
This has given Ethereum the push it needs to rank second in the market based on its market capitalization. Like Bitcoin, Ethereum also uses the Blockchain to replace third parties. As such, Ethereum is decentralized, secure, and less vulnerable to being shut down by one entity. Ether is so valuable that over 18 million of it is mined every year.
Top 5 Things that give Ether Token its Value
Ethereum’s transaction cost or gas fees
One of the main reasons Ethereum is so valuable is because of something called gas fees. In order to send Ether, the transactor must pay a gas fee, which is similar to the concept of sending Bitcoin. Trading on DEX’s for example also comes with a gas fee, which is why some people buy or hold Ether coins to use them as payment of gas fees.
Hence, this made the coin experience a jaw-dropping demand. For example, sometime in 2020 during the DeFi boom, the network experienced more investors which increased the gas fees levels.
Demand and supply
In any market, the law of demand and supply is quite useful. The logic behind the law of demand and supply can also be applied to understanding the value of Ether tokens. Since the supply of Ether coins is limited, this means that the demand for Ether coins cannot always be satisfied.
Note that when you don’t have an unlimited supply of a coin, it means that its value will go up. Additionally, since the demand for most crypto coins is not always constant, this explains why the value of most crypto coins, especially Ether, is not always fixed.
The crypto market is very competitive, no doubt. While there are several other cryptos investors could buy, they choose to buy Ethereum because of its large number of products, services, and applications built around it. Due to this, Ethereum also benefits from something called the network effects, which is a phenomenon where more people buy Ethereum, and it adds to its value.
Essentially, the more a particular thing is built on or used, the more it will be prominent. Moreover, over the past years, Ethereum has shown more strength and dominance in the crypto market because it is a faster and cheaper network developer to build.
The media can break or make a crypto token. How the media covers a particular crypto will influence how eager investors will be to buy the crypto. This has been one of the selling points of Ethereum. While in most scenarios, the media influences the crypto market by speculating the behaviour of the coin in the future.
Note that the power of the media is only based on their experience and knowledge. Although, it often has an enormous effect on the demand of the crypto or causes its downfall.
As we said earlier, the crypto market is decentralized, meaning it is neither controlled by one entity nor regulated by any government. But this is no guarantee that in the future the government wouldn’t seize control over the exchange.
In that case, it would crash the value of crypto in a matter of hours. Since there are no regulations limiting investors who want to buy Ethereum, the market is open and free to anyone.
To sum things up, since we live in an ever-changing world, the value of Ethereum keeps rising and falling because of its price and popularity. While Ethereum has been able to maintain its position in the crypto market, only time will tell whether or not another coin will usurp Ethereum in the long run.