Although much of recent commentary regarding US dollar appreciation centers on differences in monetary policy—the Federal Reserve (Fed) has hiked rates faster and more often this year than the European Central Bank, for example—the extended period of US dollar appreciation over the past decade suggests that other factors are also at work.
Long-term trends in exchange rates typically reflect persistent differences in economic growth rates and returns on capital. In the nearly 15 years since the global financial crisis (GFC), the US economy has grown faster, on average, than its major developed peers. Faster growth tends to attract capital from abroad in search of higher returns. Much of that money flowed into the US equity market, which has consistently outperformed both its developed and emerging market competitors since 2009.
People invest in cryptocurrencies for the same reason anyone invests in anything. They hope its value will rise, netting them a profit.
If demand for Bitcoin grows, for example, the interplay of supply and demand could push up its value. If people began using Bitcoin for payments 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, where developers can build decentralized finance (or "DeFi") 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. One common refrain — "one Bitcoin is one Bitcoin" — underscores the view that Bitcoin shouldn't be measured in USD, but rather by the value it brings as a new monetary system. #$BTC #$ETH