Finding true worth of crypto with total supply and market cap
The first step in making an investment is to choose the right asset. You might have zeroed in on crypto investing but which crypto would you go for? As of 2022, there are around 10,000 cryptos to choose from. However, not every crypto out there can assure you promising returns. You need to have clarity on the value of buying cryptocurrency or true worth of crypto prior to making the investment. As an investor, your goal is to make the maximum profit possible from your crypto investment. Thus, before you put your hard-earned money into a crypto asset, calculate the potential ROI the coin might be able to provide at the end of the day.
Now, two metrics play a crucial role when it comes to determining the value of buying cryptocurrency or true worth of crypto. One is market cap while the other is total supply of crypto.
Market capitalization refers to the current status of a crypto in the current crypto world. No, it’s not the ranking of a crypto but a metric that determines the ranking of a crypto or any asset for that matter.
Market cap
How do you get market cap?
The formula for calculating market cap is multiplication of cost of 1 unit of the crypto with circulating supply of the coin. So, if you want to calculate market cap of Bitcoin, the formula is-
Price of 1 BTC multiplied by the total number of coins currently in circulation.
Now, one thing to be made clear here, to calculate market cap, one needs the metric of “circulating supply”. It means coins that are currently in operation in the market, excluding those that have been burnt or destroyed.
There are 3 tiers when it comes to ranking of market cap in crypto or any asset world for that matter- High, Middle, and Low.
To reach the tier of High cap, a crypto must command a market cap exceeding at least 10 billion USD. Bitcoin, the king of crypto, boasts over 300 billion USD in market cap. The Middle bracket ranges from 1 billion – 10 billion USD in market cap. Those coins that hold a market cap under 1 billion USD come under the category of Low Cap.
Why is market cap significant?
Market cap is a key metric to gauge the true worth of a crypto. It’s not possible to get a fair idea about the overall market size, potential, and profitability of a crypto just from the price of its one single coin. Bitcoin might show the highest price per coin as well as highest market cap but you cannot evaluate every other crypto based on BTC’s example. You can look at Ripple (XRP) here. Ripple’s price is less than $2 but the coin boasts one of the highest market cap in the crypto industry.
The metric of market cap signifies how much money has been invested in a crypto. Higher market cap implies a mammoth volume of money has been put into the asset. It further implies that the coin is in high demand and a colossal volume of people trust the crypto to bring big returns.
Total supply
The term “total supply” implies the overall supply of crypto, including both unmined coins and those in circulating supply.
How is total supply significant?
The metric of total supply is significant because it helps to understand whether the crypto is deflationary or inflationary. Deflationary coins are limited and scarce in supply; if there is high demand, the coin’s price would only increase in the coming years. A good example is Bitcoin. buy bitcoin
Your chosen crypto must be able to promise you surging value over time. Thus, you need to check its total supply before making an investment in the asset.
