How does the idea of diminishing marginal utility help to explain the value of cryptocurrencies?

3 answers

• Christian OkonkwoJul 07, 2024 · a year ago
  Diminishing marginal utility is a concept from economics that suggests the value or satisfaction derived from consuming additional units of a good or service decreases as more of it is consumed. In the context of cryptocurrencies, this concept can help explain their value. Initially, when cryptocurrencies were new and scarce, the perceived value was high due to their potential for disrupting traditional financial systems and enabling secure and decentralized transactions. However, as more cryptocurrencies were created and their supply increased, the marginal utility of each additional cryptocurrency decreased. This means that the value of cryptocurrencies may not increase at the same rate as their supply, leading to a potential decrease in demand and value.
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• Moniruzzaman ShamimFeb 21, 2025 · 5 months ago
  So, let's break it down. When cryptocurrencies like Bitcoin first emerged, they were a game-changer. People saw them as a revolutionary form of digital money that could bypass banks and governments. This initial excitement created a high demand for cryptocurrencies, driving up their value. But as more and more cryptocurrencies entered the market, the novelty wore off, and people started to realize that not all of them were as useful or secure as Bitcoin. This led to a decrease in the perceived value of cryptocurrencies, as the marginal utility of each additional cryptocurrency decreased. So, while the idea of diminishing marginal utility doesn't directly determine the value of cryptocurrencies, it does play a role in shaping people's perception and demand for them.
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• Jan JonesSep 15, 2022 · 3 years ago
  Well, at BYDFi, we believe that the idea of diminishing marginal utility is indeed relevant to understanding the value of cryptocurrencies. As more and more cryptocurrencies are created, the market becomes saturated, and the marginal utility of each additional cryptocurrency decreases. This means that the value of cryptocurrencies may not increase as rapidly as their supply, leading to a potential decrease in demand and value. However, it's important to note that cryptocurrencies are still a relatively new and evolving asset class, and their value is influenced by various factors beyond just diminishing marginal utility. Factors such as technological advancements, regulatory developments, and market sentiment also play a significant role in determining the value of cryptocurrencies.
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