The first step in understanding the variance between crypto currency and fiat currency is how much value it has been given by the ones who use it. Governments have set a certain value to their currency so that a buying and selling relation is established, leading to that fiat being used and always running. Fiat currencies are backed by the governments and stated as the legal method of payment. Meanwhile, crypto currency has no authority that sets its value to a particular amount or in a particular way. It can fluctuate and change according to the people who use it. It is decentralized and many governments have banned its use in their countries. Crypto currenciess worth does not reduce as it has a fixed supply. Cryptocurrencies have different values according to their services and these values are somehow dependent upon the medium of crypto exchange.
Crypto currency markets are still very new for many people and some even do not know of its existence. Its newness makes it volatile to fluctuate in prices. The difference in price value of exchanges is very low. The difference of buying and selling is lower with foreign currency trades but it is high with cryptocurrency trade. Cryptocurrency has a market that is thin and in continuous flux.
Every day new users are coming on board with the aim of becoming a success though crypto currency. Crypto currency does work like a commodity, the value increases if the demand is high and the supply is limited and vice versa. Good reviews will increase the price while positive reviews will decrease the price. This leads us to conclude that the outside world and feedback from people does effect crypto currencys value.
Other factors that have a huge effect on the price include the level of token utility, which refers to how useful the token is; and the underlying blockchain platform in solving a real-world problem. Mining influences the price as well. If mining is taking place under difficult circumstances then the supply will be low and the demand high, causing the price to increase.