At the time of publication, one Bitcoin (BTC) is valued at $ 47,247, while one Dogecoin (DOGE) is worth approximately $ 0.068. If you do not yet have a crypto or markets, you may initially think: Hey, DOGE is cheaper than Bitcoin, and if it picks up enough steam, it could catch up with BTC and also rise over $ 20,000. However, this way of thinking is illogical. Why? Market capitalization and asset supply.
Market capitalization is the combined dollar value of an asset’s circulating offering. It changes as the value of a given asset rises and falls. Cryptocurrency sites such as CoinMarketCap rank each cryptocurrency in order of market capitalization. Bitcoin is the long-time forerunner in this category and has a market capitalization of approximately $ 879 billion at the time of publication.
Market capitalization takes into account the circulating supply of each asset. Circular source is the amount of a given asset that moves freely in the market. If you multiply the circulating offer by the price of the asset, you get the market capitalization.
Assets with a larger supply often trade at cheaper prices in terms of dollar value per coin. BTC currently has a relatively low inventory of about 18.6 million in circulation, and although this number is slowly increasing due to mining, the maximum supply is still relatively small with 21 million coins. Meanwhile, Dogecoin has a circulating offering of approximately 128.3 billion, based on CoinMarketCap numbers.
Given the DOGE offering, the market capitalization will reach about $ 800 billion if each currency costs about $ 6.23. Meanwhile, Bitcoin is worth more than $ 40,000 per currency near the same market capitalization due to its lower circulating supply.
Reaching a price of even $ 1,500 per DOGE, the asset will have a market capitalization of approximately $ 192.4 billion. At the time of publication, the entire crypto market has a market capitalization of approximately $ 1.46 billion.
In general, assets with a low circulating supply can rise higher in price per currency than assets with a large supply. Yearn.finance’s YFI, for example, holds a very small circulating offering of just 36,635. YFI rose from about $ 900 in July 2020 to $ 40,000 in September 2020. A multitude of other components hold price increases, but if an asset has a relatively larger circulating supply, the price per coin cannot be directly compared to the price of coins. with a smaller supply.
Crypto assets also often contain a maximum offer programmed into their code. The available supply of each asset grows continuously through various forms of validation of blockchain networks – i.e. mining or investment – until the maximum supply is reached. Prices can dilute as coins or tokens flow to their related circulating inventory, as empowerers tend to sell their rewards for supporting the network to pay their business expenses.
What is the difference between total supply and maximum supply? “The total supply refers to the number of coins or tokens that currently exist and whether it is in circulation in some way,” Henrique Erhardt wrote in an article for Binance Academy, adding: “This is the sum of the coins that have been mined (or issued)) minus the total coins that have been burned or destroyed. ”
Meanwhile, the maximum supply is the entire supply of an asset, or more specifically the total amount of coins or tokens that can be created. This means that once the maximum stock is reached, there is no way to produce any more coins or tokens.
Understanding the market capitalization associated with the price of a particular asset can be important so that you can assess the crypto-space more realistically. You can look at the price of a single Bitcoin and consider it too expensive, and you immediately shift your focus to something cheaper.
An abundance of information is about crypto-investment. Assets vary, among other things, in their use cases, adoption, profit potential and associated risks. However, looking at each asset in terms of the specific market value, price and supply, it can help to evaluate the market.