People invest in cryptocurrencies because they believe if demand for a particular cryptocurrency rises, so too will its value. Let's take a simplified example with Bitcoin.
Theoretically, if businesses and consumers both found Bitcoin to be a better buying experience than using the U.S. dollar, the consumer might convert more of their money from dollars to Bitcoin, while the business would welcome more Bitcoin payments. If this happened on a huge scale, demand for Bitcoin would go up, and in turn, its price in dollars would increase. So, if you'd purchased one Bitcoin before that increase in demand, you could theoretically sell that one Bitcoin for more U.S. dollars than you bought it for, making a profit.
The same principles apply to Ethereum. Ether is the cryptocurrency of the Ethereum blockchain (learn more about blockchains here), which is where developers can build financial apps without the need for a third-party financial institution. Developers must use Ether to build and run applications on Ethereum, so theoretically, the more that is built on the Ethereum blockchain, the higher the demand for Ether.
However, it's important to note that to some, cryptocurrencies aren't investments at all. Bitcoin enthusiasts, for example, hail it as a much-improved monetary system over our current one and would prefer we spend and accept it as everyday payment.
» Get started. How to invest in cryptocurrency
Theoretically, if businesses and consumers both found Bitcoin to be a better buying experience than using the U.S. dollar, the consumer might convert more of their money from dollars to Bitcoin, while the business would welcome more Bitcoin payments. If this happened on a huge scale, demand for Bitcoin would go up, and in turn, its price in dollars would increase. So, if you'd purchased one Bitcoin before that increase in demand, you could theoretically sell that one Bitcoin for more U.S. dollars than you bought it for, making a profit.
The same principles apply to Ethereum. Ether is the cryptocurrency of the Ethereum blockchain (learn more about blockchains here), which is where developers can build financial apps without the need for a third-party financial institution. Developers must use Ether to build and run applications on Ethereum, so theoretically, the more that is built on the Ethereum blockchain, the higher the demand for Ether.
However, it's important to note that to some, cryptocurrencies aren't investments at all. Bitcoin enthusiasts, for example, hail it as a much-improved monetary system over our current one and would prefer we spend and accept it as everyday payment.
» Get started. How to invest in cryptocurrency