What are the Factors and Investment Risks Associated with Cryptocurrency Price Formation?

Due to the popularity and merchant acceptance of Bitcoin, its value is increasing rapidly. The reason for the increase in the price of bitcoin to an all-time high around December 2013 was due to the fraudulent trading activities of an exchange. This change in factors affecting its value has resulted in the bitcoin price being very volatile against the US Dollar, Euro and Chinese Yuan. This volatility generates a lot of noise and makes meaningful analysis difficult. Further, you can visit https://immediate-vortex.com/

Noise and price stability can be reduced by looking at the denomination of bitcoin and comparing the values with external currencies, which makes better analysis possible. This paper analyzes 66 common factors among cryptocurrencies, helping to understand what causes relative price formation. This shows that the evolution of value creation is paralleled with that of other products.

Production Cost Model for Valuing Bitcoin

The mining process of bitcoin depends on the cost of its production, as I have shown. Regression results are important in forming its value, as shown by the regression results above. Making bitcoin mining work requires a computational effort that uses electricity, which has to be paid for. This computational effort is directed and a rational agent would not produce bitcoin because of the marginal benefits that come with the cost of mining it.

Factors of Cryptocurrency Value Formation

The use of cryptocurrencies has two main directions: first, to pay for goods and services with cryptocurrencies, and second, to conduct speculative operations with cryptocurrencies. In the first direction of payment, cryptocurrency is used as a medium of exchange, but it has its limits. Due to the lack of liquidity and circulation of cryptocurrencies, it may not be useful in all areas. In the other direction, only a few specialized business organizations, mainly in the field of e-commerce, accept cryptocurrencies and use them as a medium of exchange. In addition, cryptocurrencies are often considered speculative assets in the market, as trading participants make profits due to speculative operations, which involve the use of price differences between exchange platforms and over-the-counter trading of cryptocurrencies.

Cryptocurrency Valuation: A Study of Bitcoin and Its Value Creation

This paper aims to identify the potential drivers of cryptocurrency price formation, especially through Bitcoin. Due to the increasing popularity and business acceptance of Bitcoin, an understanding of the factors influencing its value creation has become even more important. Currently, the current value of all bitcoins in existence is around $7 billion, and even more than $60 million worth changes hands every day. A developed and interesting market for Bitcoin has emerged as a result of the recent rapid rate of growth, and digital assets are increasingly being recognised as an emergent asset class. For Bitcoin and other digital currencies, there’s not only a listed market but also a developing derivatives market. Thus, valuation capability is becoming crucial for Bitcoin and related cryptocurrencies to be recognized as human financial assets.


During the price formation of cryptocurrencies, several key factors require significant attention. In this paper, we attempt to identify the major factors driving the value creation of cryptocurrencies, particularly through bitcoin. The analysis, based on the normalization of characteristics, shows that the key factors in the price formation of cryptocurrencies are: the volume of emissions, the medium of exchange in which cryptocurrencies are used, the cost of mining, and the speculative factor. Of these, speculative factors play an important role in the price formation of cryptocurrencies, as they are linked to the needs of investors and their interest in acquiring assets. In this paper, we examine the risks of investing in cryptocurrencies, which include financial, regulatory and technical risks. The financial risks of investing in cryptocurrencies differ from traditional money, as it is not controlled and regulated by a central bank, but rather depends on the computing capabilities used.