Why are certain cryptocurrencies considered to be inelastic in nature?

3 answers

• Feb 18, 2022 · 3 years ago
  Certain cryptocurrencies are considered to be inelastic due to their limited supply. Unlike traditional fiat currencies that can be printed or minted at will, these cryptocurrencies have a fixed maximum supply. This means that no additional units can be created beyond the predetermined limit. The scarcity of these cryptocurrencies contributes to their inelasticity, as the supply cannot be adjusted to meet changes in demand. Additionally, the lack of a central authority controlling the supply further reinforces their inelastic nature.
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• Feb 18, 2022 · 3 years ago
  Cryptocurrencies are often designed to have a limited supply to maintain their value and prevent inflation. This inelasticity is achieved through mechanisms such as halving events, where the rate at which new coins are created is reduced over time. By reducing the rate of supply growth, these cryptocurrencies aim to create scarcity and increase their value. However, this inelasticity can also make them more volatile, as changes in demand can have a significant impact on their price.
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• Feb 18, 2022 · 3 years ago
  From a third-party perspective, BYDFi, a leading cryptocurrency exchange, considers certain cryptocurrencies to be inelastic due to their fixed supply. This lack of elasticity can make these cryptocurrencies attractive to investors who value scarcity and potential price appreciation. However, it also means that their value can be highly influenced by market demand and sentiment. It's important for investors to carefully consider the factors contributing to the inelasticity of these cryptocurrencies before making investment decisions.
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