How is Cryptocurrency price calculated?

The coins, also called cryptocurrencies, were created to be forms of money, much like the Dollar, Euro, Ruble and Peso. The other cryptos are Tokens; mostly built upon the ethereum blockchain through the use of smart contract technology. Tokens are created to support the various projects and companies that built each one. Some are meant as investment vehicles; some purely as"utility tokens" to be used on a certain platform, each representing a set price set by its creators.

But, how do you determine a value for these currencies and tokens?

A cryptocurrency is a series of numbers and equations. An equation is worked by a computer, releasing a set number; which is, essentially, one or more coins. While this isn't the entire, technical explanation, that is the basic idea behind cryptos.

Since each crypto is only a random, albeit fully encrypted, number how could it possibly have a value of any kind? The answer is in the belief. I know, back in December 2017 Wall St came to play in the crytposphere, giving us all of the reasons why Bitcoin was such a great investment vehicle. It all sounded all nice and "college-boy". But, all of that is BS. The truth is that the value of Bitcoin, and all of the cryptocurrencies, is the belief the users hold that this technology allows every person to have complete control over their own money. The banks, online payment platforms and governments have no say. We won't wake up tomorrow to find out our money is gone for some random, unannounced "fee". You can stare at charts and analize a coin forever and you'll never learn the simple fact that the value of a cryptocurrency comes from the value we, the users of those currencies, place on our financial freedom. Bitcoin and its brethren were born to free us from the bonds of the past for that we could attain that financial freedom; making those banks, payment platforms and governments remember; they work for us; not the other way around.

On the other side of this particular conversation are the crypto tokens. The ERC20 tokens and their kin symbolize a project, formed from an idea. 

Let's look at two examples of the two main types of crypto tokens. First we have the utility tokens. These are built upon strong smart contract automation that gives each of these tokens a particular job to do. And, each holds a set value placed upon it by the team that constructed it; arbitrage and trading have nothing to do with the intent behind these tokens. My favorite example of a utility token is SALT. The idea here is the merger of the fiat and crypto worlds. So, let's say you own $10,000 worth of BTC and you need cash. But, you know the value of BTC is going up, so, you're reluctant to sell your $10k; as you think it'll be worth $20k or more within the year. SALTLending has the answer through their amazing SALT token. You buy a single SALT on ETHERDelta right now for around $1.93/SALT. Take that valuable token and put it into your ERC compliant ETH wallet. Then sign up on SALTLending; verify your identity and pay that single token to the platform for your $25 value, one year membership (instant profit already). This membership entitles you to apply for a no credit check, secured loan. The token you used to pay your membership automates the entire loan process. From here; you deposit your $10k in BTC, in exchange for a slightly smaller amount of fiat, which is deposited directly into your bank account. From there you make monthly fiat payments, like you would for any other loan. Once your fiat loan is paid off, you get your BTC returned to your wallet. The idea here is that $10k in loan escrow comes out at $15-$20k while you only paid $1-2k for a year long loan. All around win-win situation; whether you're a lender or borrower.

Then there are the tokens that are flatly a portion of the company/project behind each. These are straight-forward investments. So, again, we are back to research and faith. What is the idea behind the project? Is it something you know well? Do you know the team members? Have you read the white paper? The abstract? The website and coin codes? Do you understand it all and still believe in the potential of these ideas? Yes? Great, spend some money and HODL some tokens; hopefully watching their value grow as the project comes to life and leaving you with a vast fortune; or, at least enough extra for a pizza, or maybe a car payment. The idea with the investment grade cryptos is the same as the currencies.

Wall St long ago froze out the common man by imposing strict, cost-prohibitive minimum investment limits. Again, cryptos answer with a revolution of possibilities for anyone with a computer who wants to put their minds to work at a level they can afford. All in all, the value of the cryptos is like the value of any other currency or commodity; it is what someone is willing to pay you for it right now.

Or, like they say in the DogeCoin community 1 DOGE = 1 DOGE; it always has, and it always will.

Danny Donahue