Mar 12, 2019 10:15 UTC
Mar 12, 2019 at 11:44 UTC
What Is Circulation Supply In Cryptocurrency?
With Bitcoin’s exponential growth and its overall success, new investors are looking to invest in cheaper digital coins in hopes of catching the next coin on its path to reach $3,800.
Investors prefer to buy coins which are as cheap as a fraction of a penny hoping to see the same results as was seen in the case of Bitcoin (BTC) and Ethereum (ETH). But, they often ignore one key ingredient: Circulation Supply.
At the time of writing this post, BTC has a circulating supply of 17.5 million coins, with the highest amount of bitcoin being capped at 21 million coins depending on the code.
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With the existing price of around $3,800, that brings the market cap to roughly $68 Billion, market capitalization measures the total sum of coins in circulation times with the current market price (17,583,862 BTC x $3,878.74 ~ 68,190,216,836). This gives Bitcoin the largest market capitalization of any coin, at the time of writing (March 3rd, 2019).
What tends to happen is that new investors buy into crypto projects with billions of coins in circulation hoping that they would rise to prices similar to BTC. But, that’s impossible! Here’s why?
Imagine a project, ABC, that has 50 billion coins in circulation. Let’s say today, 1 ABC = $0.10, that would bring the market capitalization of ABC to $5 Billion (50 billion x $0.10).
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Now, that’s reasonable in today’s cryptocurrency market assuming the market cap of all mainstream digital coins added together is measured to be around $700 Billion.
Now, if 1 ABC rose to $10, we would be looking at a market capitalization of $500 Billion, which is close to the entire cryptocurrency market cap combined. You can only imagine how absurd it would be to speculate 1 ABC reaching $100, $1000, or even $15,000 per coin.
This needs to be taken into account when considering investments as well as expecting prices to approach Bitcoin. A realistic prediction is a price of less than $10 per coin if considering a coin with billions in circulation, at least in today’s market.
It is wise to catch the coins with large circulating supplies in their early development because of the fact that going from a fraction of penny to being worth over $1 can still yield profitable returns. In case you wish to invest in coins that have potential to reach prices near Bitcoin, you should focus on the coins with a circulating supply that is at least in the proximity of Bitcoin, or in the tens of millions.
So, this is how Circulation Supply affects the investment goals!
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