Many economists and philosophers have tried to figure it out without much success. The main idea behind this is the contradiction that although water is essential for survival, its price in the market is much lower compared to the price of diamonds. We all know that diamonds don’t have much practical use in our everyday life, especially compared to water.
One reason for this could be that the price is not dependent only on the utility but also on other factors like supply and demand, for example, which can affect price action regardless of the utility. Another important factor that can affect the price of a cryptocurrency can be the cost of minting. This can affect the market value no matter what the utility is. If the expense of production of a coin is high, its price may also be high — even if its utility is very limited.
Furthermore, one big factor that can impact the price of a cryptocurrency is speculation. Cryptocurrencies are very often viewed and advertised as speculative investments. There are plenty of people who are buying them in the hope that their prices will increase over time. Such speculation can increase the price of a coin, even if its utility value is low. This is because investors are ready to pay more for an asset if they believe its price will go higher in the future.
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There has been a very interesting mystery that has been occurring for many years. It’s known as the paradox of value or the water-diamond paradox. Many economists and philosophers have tried to figure it out without much success.
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