Where is the actual value of Altcoins coming from?

[BTCXRPTalk]

Simple question, probably a more difficult one to answer:

What makes Altcoins actually valuable?

[johnnybtct]

Nothing, pure speculative value.
Probably the easiest money ever in Internet history to earn, setup ICO and say the same bla bla bla how "revolutionary" is that

[Jdope]

Alot of it is speculation, but some of it is backing up a project with a real business/future value, some of it also like litecoin, bitcoin and monero/zcash is purely for transferring money and that is not a small business

[BTCXRPTalk]

Alot of it is speculation, but some of it is backing up a project with a real business/future value, some of it also like litecoin, bitcoin and monero/zcash is purely for transferring money and that is not a small business

backing up a project with a real business/future value



Where does that future value come from though? Can you give an example?
What's the endgame here?

[Geleve]

Answer is simple; supply and demand.
Project founders specify a price during ICO period. After that according to development of project demand increases or decreases. And the price also increases and decreases accordingly.

[maku]

Most altcoins are constructed on the premise of being something unique, needed, revolutionary and better than every existing altcoin - and most of them are totally wrong about it.
Significant number of altcoin have no real life usage and what makes them somewhat valuable is people faith that someday altcoin X might be used by company Y etc.
Yet most of them are traded on one exchanges and price is shaped by news and rumours about the coin.

[Funeral Wreaths]

Alot of it is speculation, but some of it is backing up a project with a real business/future value, some of it also like litecoin, bitcoin and monero/zcash is purely for transferring money and that is not a small business

backing up a project with a real business/future value



Where does that future value come from though? Can you give an example?
What's the endgame here?

it is just like you're asking what should be the next target price or what would be the future prices of those stated above. no one knows about it, and we don't have crystal balls to guess the prices or even we are not psychic to read other peoples mind, it is purely the market and if the trade is ongoing then the market of that specific coin is active, and besides once the dev of that project also announce something that is also a signal or can trigget the market, either up or down.

[panorama]

It should really have nothing to do with value of the company unless the token actually represents ownership. In most cases, tokens are an asset that can generate revenue, so (in my opinion) the proper way to value a token is to look at the potential revenue (which seems almost impossible to do for most companies right now) and value the token based on a risk-adjusted yield on cost.

Think of a token like owning a taxi medallion in NYC. You can't legally drive a taxi unless you have a medallion, so the price of one fluctuates based on how much money one can earn you and the risk/volatility of those earnings relative to other investment options.

Before Uber, owning a medallion pretty much guaranteed consistent income, so an owner might be happy with a 5% yield for the risk. Uber has changed the market dramatically, so now owners might require a 10% yield because of the added risk.

To be more specific, let's say pre-Uber a medallion owner could expect $50k per year in income. The value of that medallion would be be $1 million ($50k / 5%). Let's say after Uber, an owner can only expect $35k per year, with less certainty. The value would now be $437,500 ($35k / 8%).

Of course, estimating revenue is hard for altcoins because they are so new, but it should get easier in time.

I think the market will transition to this approach in time, but right now altcoins are mostly just trading on pure speculation.

One last point - Similar to tokens, part of what gives a medallion its value is the fact there's a limited supply. Even the risk that more could be added would have an impact on value, which is why understanding hard caps and knowing what happens to unsold tokens is important.

[alyssa85]

Some of them have features that bitcoin doesn't have - see Ether, Monero etc. Some are used to move money because bitcoin fees are too high, and by definition this means buying and selling the alts as you move them about. And some of it is speculators piling in because they feel it's a cheap way to earn some bitcoin - buy some undiscovered alt, watch the price rise, sell for bitcoin.

[electricretard]

It's always been mostly speculation but this year it has started to slowly turn into several projects actually having value. This ain't 2014 and the 20 awful shitcoin launches every day anymore. A lot of talented people are working really hard on their projects with proper backing in place. Things take time but patience has paid off big time for many. That being said, speculation is still a huge part of it.

[Celsiuss]

It's what's makes anything valuable. Supply and demand. Most coins have a limited supply, and if the demand is high enough, a single coin could become extreme valuable. Demand can somewhat directly translate to popularity.

[Zakhal]

Its all the extra money in the world trying to find place to invest. Stocks are overvalued after last year so they dump all money into cryptocurrencies. Once stock market corrects itself and starts to suck money again, situation might revers a bit but for sure crypto is now established for sure. Its as good investment as any.

I think crypto has bright future allready since fiat is screwed because of banks and bad politics. Banks are constantly printing more fiat out of their asses while crypto has hardcoded limits. Once people will see that crypto keeps its value better they will dump fiat and start use crypto directly. At some point they might even want their salaries as crypto if fiat crashes hard.

Rothschild said "Give me control of a nation's money and I care not who makes it's laws". With crypto banks are finally going to loose that control. Thanks to decentralization no one can truly control money ever again.

Will cryptocurrencies replace fiat money in the future?

Most certainly, tokens from the blockchain deemed as currency of value by organizations will certainly replace fiat currency.

I believe Bitcoin shall remain the currency that people use for long term investments like stock and Ethereum would be traded on a regular basis much similar to paypal or venmo.

Banks may soon issue cryptocurrency that is based off on their own private blockchain and hold currency values like how banks from different countries hold each others, similar to how US banks hold Naira in Nigeria to maintain the exchange rate.

https://www.quora.com/Will-cryptocurrencies-replace-fiat-money-in-the-future

Banks might issue their own crypto but people will not use it if its not limited and decentrilzied. There is no need even to store money to banks when crypto becomes common.

[maeusi]

Cryptocurrencies are used by more and more people and have their own communities so I think, upgoing prices are not only based on speculations. Many altcoins come with awesome projects like new online technologies, supercomputers, cloud services, solarparks, healthcare and many more.

[Legendari]

Absolutely all coins are rising ladder of hopes and expectations of investors, even bitcoin.

[TheFriends]

Simple question, probably a more difficult one to answer:

What makes Altcoins actually valuable?

90% of the price is based on speculation, many altcoins do not contribute anything to the ecosystem.

[sylance]

As others have said, the value comes from supply and demand.  That's what drives all value, not just in crypto.  Whether it's crypto, the stock market, a cheeseburger, or a cell phone... the value (not price) is a function of supply and demand.  I called out price because sometimes a third force (government) comes in and forces the price irregardless of the supply/demand ratio.  In my experience, this almost always destroys the long term value of what gets regulated.

[tothetop]

It should really have nothing to do with value of the company unless the token actually represents ownership. In most cases, tokens are an asset that can generate revenue, so (in my opinion) the proper way to value a token is to look at the potential revenue (which seems almost impossible to do for most companies right now) and value the token based on a risk-adjusted yield on cost.

Think of a token like owning a taxi medallion in NYC. You can't legally drive a taxi unless you have a medallion, so the price of one fluctuates based on how much money one can earn you and the risk/volatility of those earnings relative to other investment options.

Before Uber, owning a medallion pretty much guaranteed consistent income, so an owner might be happy with a 5% yield for the risk. Uber has changed the market dramatically, so now owners might require a 10% yield because of the added risk.

To be more specific, let's say pre-Uber a medallion owner could expect $50k per year in income. The value of that medallion would be be $1 million ($50k / 5%). Let's say after Uber, an owner can only expect $35k per year, with less certainty. The value would now be $437,500 ($35k / 8%).

Of course, estimating revenue is hard for altcoins because they are so new, but it should get easier in time.

I think the market will transition to this approach in time, but right now altcoins are mostly just trading on pure speculation.

One last point - Similar to tokens, part of what gives a medallion its value is the fact there's a limited supply. Even the risk that more could be added would have an impact on value, which is why understanding hard caps and knowing what happens to unsold tokens is important.

Very interesting to read this, thanx))

I`d also note that not all the cryptos are purely speculative. Dont forget about such coins as ether, which is tied to the smart contracts technology. You need to deal this ether if you desire to use the advantages of such cutting edge technology, and this fact provides the permanent demand for the coin, which in it`s turn may lead to any speculative consequencies...

[overttherainbow]

What actually assigns the particular value to the token though? Is there an algorithm involved that weighs the total value being traded at any given time or the total amount or token-holders?

When the BTC price falls, what is the actually mechanism behind it that determines it falls this much? I don't expect anyone to have a perfect answer, but speculation isn't a thing. Speculation, the concecpt, can't actually do anything. The speculation can cause people to buy it and then maybe that fulfils some criteria that allows the price to increase? Speculation can't fly out of your brain and alter the price like some little demon. There must be something else to it.

Take the increase of price correlated to the increased investment into the token. So I pay Joe for 1 BTC and he transfers that 1 BTC to me. How does that transaction affect the price?

Even the consider the money ICOs raise. So I understand that may set the initial cap and token rate, but how do future trades affect the price? Does anyone have an almost exact answer? How is it the supply-and-demand changes the price as we see it?

[k1mera]

Simple question, probably a more difficult one to answer:

What makes Altcoins actually valuable?

Tokens are like shares in fiat world. This means they represent assets that can generate revenue, so probably the value of tokens is to look at the potential revenue or how and how much they can generate profits (which seems almost impossible to do for most of companies which use tokens right now).

[sylance]

What actually assigns the particular value to the token though? Is there an algorithm involved that weighs the total value being traded at any given time or the total amount or token-holders?

When the BTC price falls, what is the actually mechanism behind it that determines it falls this much? I don't expect anyone to have a perfect answer, but speculation isn't a thing. Speculation, the concecpt, can't actually do anything. The speculation can cause people to buy it and then maybe that fulfils some criteria that allows the price to increase? Speculation can't fly out of your brain and alter the price like some little demon. There must be something else to it.

Take the increase of price correlated to the increased investment into the token. So I pay Joe for 1 BTC and he transfers that 1 BTC to me. How does that transaction affect the price?

Even the consider the money ICOs raise. So I understand that may set the initial cap and token rate, but how do future trades affect the price? Does anyone have an almost exact answer? How is it the supply-and-demand changes the price as we see it?

No, there is not a mechanism that is determining the price; meaning no system is telling exchanges to set the price of Bitcoin to $4,564.  All the exchange is doing is averaging the market price at a specific time.  The price comes from thousands of people putting 'buy' and 'sell' orders into an exchange for Bitcoin.  The below image is old, but still tells the story:



As you can see, the price is $332.11.  No system forced this price, it comes from the meeting of all the 'buy' orders on the left, and all the 'sell' orders on the right.  The left is the demand and the right is supply.  If the right hand side dried up and less people decided to sell their Bitcoin, then the demand would push the price up as people offered more and more for their coin.  Eventually people would offer enough for people to start selling again.  This is why exchanges with more buy and sell orders have more stable prices.