Cryptocurrencies are being discussed everywhere. From homes to offices, from jogging to gyms and from restaurants to even restrooms. After the ‘Bitcoin Boom’ of 2017, most people have a fair idea of Bitcoin or Cryptocurrency actually are and how does it all work. Millions of people around the world are planning to invest in cryptocurrency. And that is where the whole confusion starts. Which cryptocurrency to invest? Does this cryptocurrency has any long term value? And lastly, should I proceed with investment or not? Deep down, you will find all these questions are related to the value of cryptocurrencies. So, what determines the value of a cryptocurrency?


Bitcoin, contrary to popular misconception, is not world’s first cryptocurrency. It is world’s first decentralized cryptocurrency. It came to existence in 2009. And, it is also regarded as world’s first free market global currency. There are a number of reasons behind Bitcoin’s astronomical rise, some of which are listed below: Decentralized- One of the most unique feature about Bitcoin is that it is decentralised. Still not understandable? OK. In most basic terms, Decentralized means no bank or government controls, administers or monitors it. It doesn’t allow any bank or government to even facilitate any of the transfer involving itself. It is transferred and approved by the common people involved in the transaction. Everyone enjoys same power, hence, it is decentralised. Blockchain- One of the biggest headaches with old cryptocurrencies was the issue of “double spending”. Double spending means if a person spends a unit of currency to buy something, it was still possible for the person to manipulate systems in a way that he would still have the currency with himself even when the system approved the transaction. In simple terms, people were able to buy things or services without actually spending the cryptocurrency. They used same unit of currency in several transaction allowing them to spend the same currency again. However, Bitcoin crushed this cheap practise though the introduction of its peer-to-peer network called the Blockchain. The first Bitcoin was created and issued by Satoshi Nakatomo, a mysterious internet personality whose real identity remains unknown. So, in a very strange way, no one in the world has any idea of who is the real brain behind Bitcoin. Despite intense speculations around the name Satoshi Nakatomo, no one knows who he is.


Market cap is the most popular indicator for the value of any cryptocurrency, but it alone cannot guarantee to estimate true value of a cryptocurrency. There are a number of other factors which must be considered in order to see, get and understand the complete picture. Following are some factors which determine the value of a cryptocurrency and you must check them before you invest in cryptocurrency:

Market Cap
As mentioned before, market cap is the most popular method of determining the value of a cryptocurrency. Market cap, short for market capitalisation, is the value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price. Despite the fact that market cap tells only a part of the story, people widely treat it as the most important factor while determining the value of the cryptocurrency. It is the reason how Bitcoin has managed to be crowned as the largest cryptocurrency surprisingly when its market cap within the cryptocurrency market has fluctuated between 35%-40%. So, Market cap does not give whole picture particularly when altcoins are under consideration.

Maximum Supply
If you are a cryptocurrency enthusiast, there is fair chance you already know about maximum supply. If not, allow us to help you. Most cryptocurrencies have a maximum supply. In most simple terms it is the amount of coins that will ever exist for any cryptocurrency. For example, there will only be 21 million Bitcoins. Not a single coin more than 21 million. So, maximum supply for Bitcoin is 21 million. However, there are a number of currencies which do not have a maximum supply, meaning there is no limit on the number of their coins in market. Ehtereum falls in this category. It does not have any maximum limit. But this is significant because it means the market cap of Ethereum will keep on increasing as long as people generate Ether. After it is pretty obvious, lower the maximum supply higher the chances of getting a high price because of limited availability.

Total Supply
Contrary to popular belief, total supply and maximum supply are not the same concepts. Total supply refers to the total number of coins which are in existence today. Attention please, because not all the existing coins are in circulation. So, the total supply is always equal to or greater than circulating supply. For example, until January 2018, 80% (about 16 million) of the Bitcoins have already been mined. This means the total supply of Bitcoin is 16 million (though not every coin is in circulation). Similar is the case of Stellar Lumens, whose total supply today stands at a whopping 103.5 billion XLM. Even though they don’t have a maximum supply, it is nearly impossible to create more XLM because they cannot be mined and are largely controlled by a centralised authority.
Again low supply will mean highly volatile market in favour of high prices.

Is its mining possible?
When visiting sites like coinmarketcap.com, you can notice that a lot of currencies have asterisks (*) marked next to them. This means that these currencies cannot be mined further. They have achieved their maximum supply. In very few cases, this has been the case since day one. But it doesn’t, in any way, mean that these currency does not have a growth potential. There has been times when about five non-mineable currencies are among the top 10 cryptocurrencies in terms of market cap. Hence you cannot trust market cap as a reliable source of information for investment.

Native Exchange
A widely overlooked fact is of native exchange. There are a number of cryptocurrencies which are traded majorly through one exchange and that exchange is controlled by its developers. Good or Bad? Bad because it leaves a wide gap for price manipulation by developers. This also influences market cap of such currencies. BitConnect is such example. About 95% of its trading is done through its own (native) exchange which is BCC exchange. Such cases are very scarce but it is always worth checking.