What makes a cryptocurrency (alt coin) valuable?

[ldgryvvh]

Hi guys,

i've been struggling to grasp the concept of what makes an altcoin or cryptocurrency valuable. Well, i understand Bitcoin meteoric rise as it was the first of its kind and there is an intrinsic value in its core technology that (just) might be the next primary mode of digital transactions in the future. However, is there really space for any more of such? Lets just look at the market cap, i could almost firmly say that among the top 10 cryptocurrencies, most of the owners of such coins all have a stake in Bitcoin. This translates of to a finite number of people in this whole cruptocurrency community just cycling their money round and round.

So why do people still believe in other coins and their price? Say an altcoin ICOs for abt  $1/coin, what makes people see the value?

I hope people see the angle i'm curious about. Thanks

[bbc.reporter]

All that gives a coin their value is the law of supply and demand. It will only be valuable up to a point of how much the buyer is willing to pay for them.

[kiklo]

Hi guys,

i've been struggling to grasp the concept of what makes an altcoin or cryptocurrency valuable. Well, i understand Bitcoin meteoric rise as it was the first of its kind and there is an intrinsic value in its core technology that (just) might be the next primary mode of digital transactions in the future. However, is there really space for any more of such? Lets just look at the market cap, i could almost firmly say that among the top 10 cryptocurrencies, most of the owners of such coins all have a stake in Bitcoin. This translates of to a finite number of people in this whole cruptocurrency community just cycling their money round and round.

So why do people still believe in other coins and their price? Say an altcoin ICOs for abt  $1/coin, what makes people see the value?

I hope people see the angle i'm curious about. Thanks

You answered your own question:
People are what make a coin valuable.

A thing or service only has value , if another person is willing to trade it for something else.

Show a caveman some fiat cash , and unless he used it to wipe his butt, it would hold no other value for him.
But to a modern man , he could use it to buy necessities.

Show a modern man some flint rocks, and for him it has no value.
But to the cave man it would have more value than fiat, because the cave man could use it to make fire to cook his food or stay warm & dry.

All Value is subject to the use or trade that an individual sees for that object.

I see more value in ZEIT than I do in BTC, where as others see more value in another coin than BTC and others think BTC is all there is.
Just depends on an individual assessment for each coin.

 

[jacaf01]

For me

1. Developers behind the project
2. The novelty of the project
3. The problem is trying to solve
4. How huge the community behind it trust the developers.
5. How strong is the partnership they are able to secure

[dinofelis]

All that gives a coin their value is the law of supply and demand. It will only be valuable up to a point of how much the buyer is willing to pay for them.

Yes, and that demand comes from a belief system.  There is only one thing that ultimately generates demand, and that is desire for satisfaction in the broadest sense.  In as much as the offer of that satisfaction is limited, there is a tension between demand and limited offer, and that tension is called "price".  We all get great satisfaction from breathing air (so much that if we don't, we die), but the offer of air is larger than the demand for the moment, so the price is zero.  There is no tension, so the price is zero, but their is (huge) value (our life depends on it).  Essentially, only goods and services can directly help us in getting satisfaction so in as much as they are not in unlimited supply, only they are the ultimate source of "price".

However, we can anticipate, and make plans.  We can make plans to provide goods and services where there is a tension (for which there is demand, and still limited or in-existent offer) in order to be able to trade those for other things (goods and services) that give us satisfaction.  Doing so increases a demand for production capital, and hence production capital also has a price.  

And finally, there are "monetary items" which have little or no actual potential, nor to satisfy directly, or to be production capital, but for which there has occurred an infinitely recursive belief that they have a price.  Whenever such an infinite belief system gets hold, the monetary item gets a price (is hence a carrier of value).  Nothing else is needed for this belief system to take hold.  Bitcoin is an example.  Historically, gold got such a belief system attached to it, and with some coercion, fiat money also gets to have such a belief system.

Now, most people don't like the idea that their precious monetary assets are nothing but "belief", and go and look for its "intrinsic value", but there isn't any.  In as much as a monetary item also has intrinsic value (as direct satisfaction, or as production capital), it isn't used as monetary item, or its intrinsic value is much lower than its market price.  Gold has some intrinsic value (as jewels to be beautiful, or technical applications), but that intrinsic value alone is much lower than the market price of gold.

Fiat money has only the intrinsic value of the paper it is printed on.  And bitcoin has some intrinsic value as "timestamped immutable ledger" but that is much much smaller than the bitcoin market price.

A monetary asset's price is an infinitely recursive belief system: you believe it has value (and are willing to spend goods and services on it to obtain it) because you believe that Joe will accept it later against similar value (and will be ready to give you goods and services for it), and you believe that Joe will believe that, because Alice will believe that,  because she believes that Jack will believe it...
 
Nothing more, nothing less.  The belief is what makes the offer (wrt to one's desire to "cash out" and the current market price) and that same belief is what makes the demand (wrt the need to store value for the future).

Of course, you also have to believe that the "token transmission" will keep functioning, but that's about it.  All "intrinsic value, developers.... " is similar to "intrinsic value", way, way smaller than monetary belief value.

[skeet]

Big exchanges, whales and pump/dump group makes a coin even more valuable.

[kelsey]

utter nonsense

the main driving force behind all 'pricing' in cryptoland including Bitcoin is nothing more then the simple economics concept known as "the greater fool theory";

the greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.
a price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price. in other words, one may pay a price that seems "foolishly" high because one may rationally have the expectation that the item can be resold to a "greater fool" later.

[dinofelis]

utter nonsense

the main driving force behind all 'pricing' in cryptoland including Bitcoin is nothing more then the simple economics concept known as "the greater fool theory";

the greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.

I make the distinction between "greater fool theory" which is, as you rightly say, a belief system where you think that you will find greater fools than you, that are willing to spend more goods and services on a token than you do on one hand, and "same fool theory" which is the basis of a monetary asset, where you believe that you will find similar fools than you, that will spend about the same amount of goods and services on the token than you want to do.

In as much as "greater fool theory" has to collapse, because not sustainable, "same fool theory" works, because it is sustainable: you can appear many times in the chain in same fool theory, while you will of course not appear several times in "greater fool theory", so you will run out of fools.

That's the difference between a speculative bubble (greater fool theory) and a monetary asset (same fool theory).

[spartak_t]

utter nonsense

the main driving force behind all 'pricing' in cryptoland including Bitcoin is nothing more then the simple economics concept known as "the greater fool theory";

the greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.

I make the distinction between "greater fool theory" which is, as you rightly say, a belief system where you think that you will find greater fools than you, that are willing to spend more goods and services on a token than you do on one hand, and "same fool theory" which is the basis of a monetary asset, where you believe that you will find similar fools than you, that will spend about the same amount of goods and services on the token than you want to do.

In as much as "greater fool theory" has to collapse, because not sustainable, "same fool theory" works, because it is sustainable: you can appear many times in the chain in same fool theory, while you will of course not appear several times in "greater fool theory", so you will run out of fools.

That's the difference between a speculative bubble (greater fool theory) and a monetary asset (same fool theory).

Don't like the 1-word comments, but... TOUCHE. Will add that I completely agree with dinofelis and kiklo. I have repeated countless of times (and I stand strongly behind Charlie Lee's opinion that a cryptocurrency does not need gimmicks in order to succeed) that people are the ones who are giving the value, not the tech. That is why I believe that everything must be explained in a simpler manner, rather than using fancy roadmaps and whitepapers (which, of course are needed, but you need more than that to bring the average Joe on board).

[50cent_rapper]

For me

1. Developers behind the project
2. The novelty of the project
3. The problem is trying to solve
4. How huge the community behind it trust the developers.
5. How strong is the partnership they are able to secure

Thanks, good list.

[ldgryvvh]

Hi guys, so far, haven't been convinced with the answers. I think many here are confused with price and value. Price is simply what you see it at mediums for exchange. Value however is different from price. Pump and dump attracts people who think price matters but value however should not be associated with price.

[Backside walkaround]

People have answered it just as well, but I'd say it's consensus that gives anything value.  Two or more parties agreeing some intangible altcoin has value gives it a price.   And it's pretty much as simple as that.

[dinofelis]

Hi guys, so far, haven't been convinced with the answers. I think many here are confused with price and value. Price is simply what you see it at mediums for exchange. Value however is different from price. Pump and dump attracts people who think price matters but value however should not be associated with price.

You are right that value is different from price, but value is individual.  Value is the amount of satisfaction you individually get or believe you will get from something.  Price is the tension that illustrates the intensity of demand (by many who value something for their individual reasons) and the offer that is available.

The problem with something like a currency is that it has absolutely no direct value (you do not get any direct satisfaction out of holding a bitcoin or a dollar): all its value comes from the *projected* value that you believe/hope to obtain with it later.  Now, as you will not get any satisfaction from holding a bitcoin or a dollar in 50 years either, the only thing that you can project, is the future price of it.

That is different with a bottle of wine for instance.  You may project that if you put a good bottle of young wine aside, you will enjoy the old mature wine much more 5 years from now when you drink it.  So it has direct future value to you.  Whether that bottle will have a high or low price on the market doesn't matter, you keep it because you believe/hope that you will get a lot of satisfaction from it in 5 years.  An even better example is planting an apple tree.  Now, it takes effort and work, and you won't get anything from it.  But in 5 years, you hope/expect/believe that you will get apples from it.  Whatever the price of those apples for which you could sell them.

But with a currency or other intermediate asset, the only thing you can do ever to get satisfaction of it, and hence value, is to sell it at a market price.

So for this kind of thing, there IS an equivalence of price and value.  Because there's no other satisfaction to it.  Or very little: you may find satisfaction in seeing a technical system work well and "be part of it" or something.  But that's very secondary.

The value of a monetary asset is nothing else but the belief/hope of its future price.  The value of an apple tree or bottle of wine is not necessarily related to its future price because it can provide you directly with satisfaction, but a currency can't.

[dballing]

in POW don't forget the electricity used to secure the blockchain. That is worth something you know!

[dinofelis]

in POW don't forget the electricity used to secure the blockchain. That is worth something you know!

That doesn't give value, that's a production cost.  It is not because I use expensive caviar to make an imitation of bull excrements, that this imitation of excrements has value.

[electronicash]

a crypto currency may have value when its platform can be considered revolutionary.  the demand and supply will follow so long as it has its use for adoption.
and most importantly it will have more value if its funded well.

[kelsey]

utter nonsense

the main driving force behind all 'pricing' in cryptoland including Bitcoin is nothing more then the simple economics concept known as "the greater fool theory";

the greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.

I make the distinction between "greater fool theory" which is, as you rightly say, a belief system where you think that you will find greater fools than you, that are willing to spend more goods and services on a token than you do on one hand, and "same fool theory" which is the basis of a monetary asset, where you believe that you will find similar fools than you, that will spend about the same amount of goods and services on the token than you want to do.

In as much as "greater fool theory" has to collapse, because not sustainable, "same fool theory" works, because it is sustainable: you can appear many times in the chain in same fool theory, while you will of course not appear several times in "greater fool theory", so you will run out of fools.

That's the difference between a speculative bubble (greater fool theory) and a monetary asset (same fool theory).

however nothing in crypto todate could be considered in any meaningful way as a monetary asset.

well 2 people could come out an say we use it as such, and therefore it is (so kinda on a half star out of 5 level), but nothing on the level of any national currency (hell shells are still used as currency by more people then bitcoin), and the vast majority of the crowd around here simple use crypto to make fiat (out of greater fools).

so as i said the main (not necessarily the only) driving force behind all 'pricing' here is the greater fool theory.

[shanem]

An altcoin is valuable because of their projects. As money in the crypto world is limited, the coin will need to attract fiat money investment for it to have a high value.
An example is Ethereum. It was 50k satoshi during the ICO. When news reported that banks are looking at Ethereum blockchain, hot money were going into Ethereum and price even went as high as 20 dollars.

[samcoin]

The importance of any cryptocurrency comes from its usages , and the markets which accept it .
We can watch now hundreds of Cryptocurrencies , but I don't see any importance in most of them , they have been created just for trading , while there are about ten coins only can be used for useful things .

[langaw2018]

Hi guys,

i've been struggling to grasp the concept of what makes an altcoin or cryptocurrency valuable. Well, i understand Bitcoin meteoric rise as it was the first of its kind and there is an intrinsic value in its core technology that (just) might be the next primary mode of digital transactions in the future. However, is there really space for any more of such? Lets just look at the market cap, i could almost firmly say that among the top 10 cryptocurrencies, most of the owners of such coins all have a stake in Bitcoin. This translates of to a finite number of people in this whole cruptocurrency community just cycling their money round and round.

So why do people still believe in other coins and their price? Say an altcoin ICOs for abt  $1/coin, what makes people see the value?

I hope people see the angle i'm curious about. Thanks

If you look around why altcoin can be valuable because they have platforms and products that can produce value for the coins they have because with the support of this platform there will be many people who use their shares, like BItcoin that many people want because they have advanced technology and altcoin if they have a good platform, they will definitely have more value.