A cryptoasset has a market price because people are willing to exchange money or other assets for it. But the reasons people are willing to pay can vary enormously from one cryptoasset to another.
Crypto does not have one automatic or guaranteed value. On a market, its price is created by supply and demand: buyers compete to buy and sellers decide what price they are prepared to accept.
Demand may be influenced by scarcity, usefulness, adoption, expectations about the future, speculation, community interest and many other factors. Those expectations can change quickly — which is one reason crypto prices can be extremely volatile.
The price is what the market currently pays for one unit. Whether that price represents good, poor or sustainable value is a much harder question.
A cryptoasset can trade at a high price and later fall dramatically. Another can trade for pennies but still have a very large total market value because billions or trillions of units exist.
If supply is limited while demand grows, buyers may be willing to pay more. Scarcity by itself, however, does not guarantee demand.
A cryptoasset may be needed to use a network, pay fees, transfer value or interact with particular applications.
More users, businesses, developers or institutions using or holding an asset can affect how the market views it.
People may buy because they expect future demand or prices to rise. Expectations can also reverse very quickly.
Beginners can understandably compare the price of one coin with the price of one Bitcoin. But that comparison ignores how many units exist.
Imagine Crypto A costs £1 and has 1 billion coins circulating. Its market cap would be about £1 billion. Crypto B costs £100 but has only 1 million coins circulating. Its market cap would be about £100 million.
Despite having the much higher price per coin, Crypto B would have the smaller overall market value.
For example, imagine a cryptoasset trading at £2 per coin.
Imagine 500 million of those coins are currently circulating.
£2 × 500 million gives a market capitalisation of about £1 billion.
Market cap is a useful comparison measure, but it is not the same thing as cash sitting somewhere and does not tell you whether an asset is safe or fairly priced.
Bitcoin has a limited maximum supply under its protocol, a long operating history relative to other cryptoassets, a large global network and substantial market recognition. Those characteristics are among the reasons people may choose to hold or trade it.
Companies and other organisations also hold Bitcoin. That can help us observe one part of market demand — although institutional ownership does not mean Bitcoin's future price is guaranteed to rise.
See companies holding Bitcoin →Crypto prices depend heavily on market confidence and demand. If buyers disappear or large numbers of holders try to sell, the price can fall sharply. Some cryptoassets have lost most or virtually all of their previous market value.
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LiveCryptoPrices UK provides market information and educational content. We do not tell you whether to buy, sell or hold any cryptoasset.