Search This Website

Tuesday, August 9, 2022

Why Do So Many Cryptocurrencies Fail?

 Why Do So Many Cryptocurrencies Fail?

 1. A Saturated Market

Many  factors play into the failure of several  cryptocurrencies, with one of the most prominent being over-saturation. Though the cryptocurrency market is relatively young, it's already full with budding entrepreneurs and developers. This has provided way to an over-saturation of obtainable coins and tokens, to the point where it is now incredibly hard to stand out from the crowd

due to  this challenge, many who develop their own cryptocurrencies end up abandoning their project when the asset in question doesn't gain any traction or value. As a result  , there are recently thousands of "dead" cryptocurrencies that are no longer active, which goes to show just how tough it can be to rise through the ranks in this industry.

2. Lack of Stability

The cryptocurrency market is very susceptible to a range of factors that may reason a crash. If you're into crypto, you've potential noticed how the price of a coin or token will often fluctuate multiple times a day. The value of cryptocurrencies mostly depend on supply and demand . If the supply of a coin surpass the demand, the cost will likely decline, but if the demand exceeds the supply, there's a good chance the price will increase.

The trouble with this is that the demand for an asset changes regularly. One week, a hot new project with its own native token may see big cost hikes because of  a wave of popularity. However, when things die down, and interest fades, the demand fades with it. This generally has a knock-on effect on the token's price and is a risk that must be understood when entering the crypto field.

But several other factors can even affect a crypto's price, like  scandals, regulations, and events in the traditional financial world. For example, when the global stock market faces a downward turn, the crypto market generally  experiences a similar dip. This is because several crypto investors even have money in the traditional stock market. So, when the latter suffers, investors expecting a crash will often offload their crypto holdings before the costs fall too severely.

3. Lack of Application

There are a number of various uses that a cryptocurrency can have. Most people are more familiar with store-of-value cryptocurrencies, like  Bitcoin. But several coins and tokens have additional utility in other areas.

Take Ethereum, for example, another famous cryptocurrency. While Ethereum can be invested in purely to create a profit, you can even use Ethereum to stake, pay gas and transactional fees on the Ethereum network, and pay for services within Ethereum-based projects. This provides Ethereum a lot of utility and supports in maintaining its value.

No comments:

Post a Comment