How do cryptocurrencies actually get their value? This is a question everybody investing in Bitcoin or altcoins should be able to answer. It helps to find clues when a coin is overvalued or undervalued, and can help to avoid big losses.
My personal thoughts about that is that it depends largely on the type of coin you invest.
1)
Platform coins. Coins with their own blockchains for "general use", e.g. payments and smart contracts. Examples: Ethereum, Bitcoin, Avalanche, Solana
For me these coins' value mechanism work like those of internet platforms (e.g. social networks). Their value is governed by Metcalfe's Law: the more people are using a particular coin and consider it useful for some type of transaction, the more valuable it can become.
2)
Security-like coins and tokens. Coins and tokens, with an own blockchain or not, which are tied to the success of a particular business. Example: BNB
These coins can be regulated security tokens, but above all older coins of this category are often not classified as securities. But their value proposition works similar to a stock: if the business connected with it does well, the coin normally will get valuable too.
3)
Utility tokens. These are tokens, mostly without an own blockchain, which are used to pay for a certain service.
These tokens' value can be static - for example one unit can be always worth one unit of a service - or dynamic. In the second case, their value tends to work also like a securities' value, this means if the business or DeFi project using them fares well, it can go up in value.
4)
Memecoins. Tokens which have a mainly symbolic value, connected to a popular meme. Examples: Dogwifhat, Shiba Inu. Dogecoin is actually a hybrid of this category and a platform coin, as it has its own blockchain.
I disagree with those that say that memecoins do never have any intrinsic value. Actually they work like collectibles. If the symbolic value attached to a meme is high and the coin supply isn't too abundant, then they can work as collectibles. However, their price will tend to be very volatile, as the symbolic value attached to them can change, and competing tokens based on the same meme may appear. And if there are too many memes too similar one to another, then it will be hard to achieve enough scarcity for them to work. Probably 99% of them don't work, but some do.
For some popular altcoin categories like AI coins and DePIN several of these models are possible. Siacoin and Filecoin for example are platform coins.
Opinions welcome
