SALUTATION
Hi Guys! I'm a guy who find cryptospace's a interesting place and love to dive in deeper into the chain! With the push of my bestfriends ( @bigdizzle91 and @yeshuathehighest , this one for you guys 😆) and blessings from my mentor who taught me most of my cryptospace knowledge ( @crypstocks ), enough for the forewords i think lets dive in to the topic! 🤙
FOREWORDS
Okay, so everyone of us do have their own reason why we jumped in to the cryptospace at the first time, some believe on the "decentralization" narrative, some are quite fond of the said project, but "most" of the people i knew are in for the "gains" 🤑(you know you like it 😉) at least its one of the popular reason in my opinion.
So one thing i found out when i first jump in to the cryptospace as a plebs, there's lot of misunderstanding regarding token "prices", and i found it one of the most misdirecting aspect. That's none other than how most of newbie saw the token "price tag" as one of the reason why they but it.
Say, you knew that Bitcoin (BTC) price are around $43k-ish by the time this article written, its on the news everywhere regarding hype around cryptospace, now you are curious and want to enjoy those "crazy" said gains, you start looking into various coin options on which one to "invest" on.
Okay, now you are ready with $1000 dry powder ready to be deployed on one or maybe some of the coins available, you saw and count if you spend all of the $1000 on BTC you "only" got 0.023-ish of BTC, which is less than a whole coin.
That's not one of the most intriguing choice right? You look at the other option, for the sake of this article we gonna use Dogecoin (DOGE) as example. Aha, now you could get "thousands" of DOGE with your $1000, sounds more intriguing? If yes, then you really need to look what i write later on. (Disclaimer: I use DOGE as a comparison purpose only, with no other intention rather than what has been said)
"THE" Problem
With thousands of DOGE at your disposal, you start imagining on how your life would changed if your DOGE price skyrocketing to $1? $10? $100? or even $43,000 because why not right?
Now THATS the problem here folks! Sadly many people i knew still look at tokens that way, the "price tag" are not the one to be looked at, full stop.
Main Course
Rather than the "price" we should be looking at the market capitalization (market cap), basically its total dollar value of the coins calculated by multiplying the said token price and its actual quantity available.
M.Cap = Token Price * Total Coins Available
Now this number could come in handy on many things such as:
- You could know how stable the coin price are: the bigger the marketcap, the stable the price, as it needs that much of dollar to "move" the price
- You could know how much the "upside" or "gains" possible: i'll give the example later on.
Basically, there's two types of Market Cap:
- Circulating: only count for the actual numbers of coin that has been "mined" or "available" (e.g. there's close to 19 million BTC has been mined, so 19 Mill * $43,000 = $819 Billion M.Cap)
- Fully Diluted: count for all the total supplies that "eventually" will be mined (e.g. 21 million BTC max supply times $43,000 = $903 Billion M.Cap)
You can check any coins marketcap easily using sites like coinmarketcap.com or coingecko.com they have quite complete list of any coins available
Okay now you understand the concept of marketcap, lets use the number to actually calculating things. Back to the DOGE comparison, right now DOGE priced at $0.16, lets compare it to ETH now which priced at $3300, you bag some of DOGE and now want to compare it how much could you make if someday DOGE flipped ETH. The wrong way to count it is by divide ETH price to DOGE blindly ($3300 : $0.16 = 206x gains), dont calculate things like this please.
Rather than, knew the market cap of the coins itself, ETH is at $395 Billion M.Cap, DOGE is at $22 Billion M.Cap, so in case of DOGE actually flipping ETH, you will make ($395 Billion divided by $22 Billion = 18x gains), that's a FAR discrepancies if you calculate things the wrong way (206x compared to 18x)
There's also very handy website to actually calculating how much you can gains compared to other coin, its called marketcapof.com. Check on it for more easier way of counting things!
End words
Now you knew all those things, please never calculate things the "wrong" way, there's no such thing as "coin xxx is cheap! its less than 1$ a coin! lets buy and pray the coin goes to $100!" If you happened to have friends or acquaintance (sadly i still knew many people like this 😩) tells you like that, PLEASE let them knew the right thing 😆.
Its my first time posting things like this, if there's any correction to be made please feel free to let me know, also English are not my first language so please excuse me if i write things wrong 😉.
If you have any idea on what to discuss next, also let me know 😉 and if you find this article helpful, i could appreciate some upvotes 😁.
Thanks and see you guys onto the next article!