What determines the price of cryptocurrencies?

“What determines Bitcoin’s price, and what gives it its value?” is a top three question newcomers ask when learning about crypto.

Depending on who you talk to, answers to this question vary from “Bitcoin is a new digital form of gold of the 21st century” to “Bitcoin is backed by nothing and will crash to zero.”

In reality, the value of cryptocurrencies—much like any other asset, good, or service—depends on the dynamics of supply and demand.

The higher the demand for a certain microwave, the higher its price will be. If few people go to a beauty salon or barber shop, the prices for a haircut will be lower.

We’ve written an article explaining in an easy-to-understand way what determines the price of cryptocurrencies.

You can read the article on our site here.

Can my crypto accounts be frozen?

One of the biggest advantages that blockchain technology offers is that, under no circumstance, no one can ever “freeze” your digital assets if you store them properly.

There’s no such thing as a person or entity that can press a big red “Freeze” button to block your account—let alone the existence of such a button.

This is one of the many game-changing features of decentralized finance: Users have 100% control of their assets and can even do so anonymously, while their money remains secured on the blockchain.

Banks and governments are practically incapable of influencing blockchains—even if they tried.

However, you need to know where governments can apply pressure. If you’re using Binance’s hot wallets for long-term crypto storage, this would be considered a bad idea in the crypto community.

Learn how to secure your crypto fully in our course.

What is mining, and how do you mine crypto?

You’ve most likely come across different definitions of the word “mining,” so we’re going to explain it in an easy way without going into details.

Who are miners?

Miners are people and companies that run the blockchain’s processes in exchange for crypto as a reward. The more miners there are, the more decentralized and secure the blockchain will be.

Unlike the current version of the internet, blockchain networks have no centralized servers collecting everyone’s data. Miners are independent and agree on the blockchain’s information collectively, instead of being led by a central authority.

How does it happen?

You use a special mining software on your computer. The blockchain sends “tasks” to your computer, which, if completed, earns you rewards.

Can I mine crypto from a regular computer?

It depends on the blockchain. Mining Bitcoin on a regular computer won’t work because the tasks given by the network would be too complex. Bitcoin tasks require industrial-scale hardware.

However, newer blockchains can be easier to mine with regular PCs as the tasks there are simpler.

You can learn more about mining and the Bitcoin network in this article.

What is play-to-earn, and what do I need to know about it?

The blockchain industry has had a profound influence on many aspects of our lives over the past few years. In the gaming sector, blockchain technology introduced a brand-new form of entertainment.

Gamers will be familiar with a modern concept of gaming, called pay-to-play, which means you have to buy the game to play. However, blockchain made possible a new gaming model called play-to-earn (P2E), where gamers can earn crypto or NFTs by playing the game.

Although the idea sounds promising on paper, the reality is that it isn’t simple or easy to earn significant sums from P2E games. Many projects require large up-front costs, others are aggressive and unfair with their tokenomics, and some are outright scammers.

Want to see what a P2E game looks like, without coughing up money? We’ve put together a list of free P2E games that don’t require money down to start playing, giving you a chance to start earning right from the get-go.

We also go over some things you need to know about blockchain-based gaming.

Trading and investing: What’s the difference?

Crypto newcomers often get these two terms mixed up. So, let’s learn the difference.

The two are quite distinguishable: Trading is short-term investments, and investing is the same but for the long term.

Traders open and close a lot of deals in a single day. For instance, they buy a cryptocurrency only to sell it a few hours later to lock in a profit.

Trading is highly time-consuming—and can fray a lot of nerves😅

Investing, meanwhile, focuses on the long game. Investors usually analyze a project’s fundamentals while considering its potential in the market. Thus, investors buy a digital asset specifically to hold it for a long time, from a few months to a few years or longer.

In short, investing is a better strategy for crypto beginners than trading.

However, neither of these strategies insulates you from losses. Always remember to invest at your own risk!

Whales, crabs, and shrimps

Every crypto enthusiast knows who the whales are in the crypto sea, but most likely, you don’t know the full list of its inhabitants =)

In the community, there is a specific classification of holders by the number of their coins.

They are:

Humpbacks — holders with over 5,000 BTC
Whales — over 1,000 BTC (or altcoin owners with a portfolio of at least $10 million)
Sharks — from 500 to 1,000 BTC
Dolphins — from 100 to 500 BTC
Fish — from 50 to 100 BTC
Octopi — from 10 to 50 BTC
Crabs — from 1 to 10 BTC
Shrimp — less than 1 BTC.

There are also “planktons”: BTC addresses with a balance of less than 0.01 BTC.

Most Crypto Twitter users only discuss whale activity, but knowing these classifications can help you flex your crypto knowledge.

Crypto scam: Trading bots and “multipliers”

Often, various persons offer to buy “trading robots” or bots that “know how to bring a stable profit” of 100%–500% per month.

Also, some projects offer to send a random amount of crypto to a certain address (for example, 10 USDT) with the promise to “multiply” it by several times — e.g., to return as much as 100 USDT instead of 10 USDT.

There are trading bots, but they are used for specific tasks: large investment funds, market makers, and trading companies. The prices of such bots are measured in millions. They are not universal, and no one exactly sells them in the public domain.

Therefore, never trust promises of quick and easy profits.

Crypto Speak: Faucet

In the cryptocurrency world, a “faucet” is a website or app that gives away small amounts of cryptocurrency for free, usually in exchange for completing simple tasks such as watching ads, completing captchas, or participating in games. The goal of a faucet is to introduce new users to cryptocurrency by giving them a small amount to experiment with.

But be careful: Some faucets can be fraudulent and used to collect personal data.

Crypto Speak: Exit scam

This is a scam in which the developers of a project disappear with the collected investments without fulfilling their promised obligations.

This can happen in different forms: Developers can disappear after an ICO, collapsing the market value of tokens, or after raising funds for the development of the project without launching it.

The key signs of an “exit scam” are a lack of transparency, promises of unrealistically high returns, and the anonymity of the project’s creators.

An exit scam resembles exit liquidity, and exit liquidity resembles a rug pull. In general, scams related to liquidity collapse are common in the crypto world.

Crypto Speak: Burning

Coin burning in cryptocurrency is the process of destroying tokens or coins so that they disappear from circulation forever. This mechanism is used in the cryptocurrency world for several reasons, but the main one is to reduce the supply of coins.

If the demand for a token remains the same (or increases) and the supply decreases, it will inevitably trigger an increase in its price.

What is a blockchain explorer?

Today, we’ll discuss an interesting topic. A “blockchain explorer” is a search engine for a particular blockchain.

With the help of the explorer, anyone can view all transactions that have ever occurred on the blockchain. You can track transaction histories, public address balances, network hash rates, and other details. Consider it the Google of blockchains.

Remember when we discussed the anonymity of blockchains? So, with the help of the explorer, you can thoroughly study any wallet: see how much cryptocurrency it has, from which addresses it was received and where it was sent. You can examine every transaction on the network.

There are so-called multiblockchain explorers that allow you to “travel” through several blockchains at once.

Here are some recommendation for you:

— Blockchair: Supports many blockchains, including Bitcoin, Ethereum, and Ripple.

— CryptoID: Offers fast search and analytics for various blockchains, such as Ethereum, Bitcoin, and Polkadot.

— Blockchain.com: A widely used tool that supports Bitcoin, Ethereum, and Bitcoin Cash and is praised for its user-friendly interface and reliability.

You can use any of the explorers right now and start studying blockchains!

Random Bitcoin fact: More than 50% of mined Bitcoin is in just 1,000 wallets.

This is certainly not a good statistic concerning the world’s biggest cryptocurrency. Centralizing a huge volume of coins in the hands of a relatively small group of people adds to Bitcoin’s vulnerability.

Are crypto transactions anonymous?

Crypto transactions on blockchains are “pseudonymous,” meaning they can be traced to wallet addresses (via public keys) but have no direct connection with people’s identities.

Every transaction is open to the public, and anyone with an internet connection can view them. The date, the amount sent and received, the wallet addresses — all of this data is impossible to conceal.

However, if you use a non-custodial wallet, it will be impossible to identify you as the wallet’s owner (unless you deanonymize yourself).

For example, if you send crypto from a centralized exchange to your non-custodial wallet, the exchange now knows who the non-custodial wallet belongs to since you must pass Know Your Customer requirements by showing your ID.

Therefore, if you practice the basics, you can be completely anonymous on the blockchain, and no one will ever know your personal information.

What is “astroturfing?”

The term isn’t purely crypto, but in recent years, it has seeped into the blockchain world as well. It is the promotion of a product or service, such as an ICO, without disclosing a personal interest.

Celebrities such as Steven Seagal and Floyd Mayweather Jr. have been fined by the SEC in the past for astroturfing ICOs.

In other words, this is a situation where a celebrity who has received money for advertising “pretends” that they simply like the advertised project and recommend it to their audience.

Bitcoin Critique: Regular money works fine for me, so why do I need crypto?

Did you know that the purchasing power of the United States dollar has fallen by 95% since 1913? Since the U.S. dollar is the world’s reserve currency, it has a significant impact on all currencies.

Any money you’ve saved, even your pension, is like melting ice cubes: They lose purchasing power year after year. If your salaries do not keep pace, your financial situation will deteriorate over time. That is why wealthy people invest in things like art and real estate, which are greater stores of value than cash.