The importance of the Market Cap
I see a lot of debate on the Internet about how important is the Market Cap for a Cryptocurrency, with many saying it doesn't even matter while others saying its very important. So who is right?
First, let us understand what a Market Capitalization is.
Market Capitalization is the Price X Circulating Supply.
This means that it matters a lot how many Coins/Tokens a currency has. For example Bitcoin(BTC) has a Circulating Supply of 16,943,287. If it was worth 10.000$ its total Market Cap would be 169.943.287.000 USD.
Ripple(XRP) has a Circulating Supply of 39,094,227,299 so for it to get to 10$ its Market Cap would be 390.094.229.299 USD, 2.2 times more than Bitcoin at 10.000$!
For reference, the total Market Cap of the whole Crypto Market is about 300 Billions, so Ripple at 10$ would be worth more than the total of the Crypto Market is right now.
So while anything is possible, an XRP of say 100$ is a lot less likely compared to a Bitcoin(BTC) of 20.000$ or Ethereum(ETH) of 3.000$.
It is also a lot harder and takes a lot more money to move a high Market Cap coin/token, nobody can tell you how much because lets be honest, most exchanges inflate the volume numbers by a lot.
This is why when i see people expecting coins like Tron(TRX) or Ripple(XRP) to moon, they need to understand that due to the amount of created tokens, they will never reach the price of Bitcon(BTC) because they were never supposed to.
That does not mean you can't get rich from them TRON(TRX) is up 2800% today from its ICO value of 0.0015 cents, so i bet there are already people who are millionaires from it. But it does mean if you purchase at its current value of 0.043 cents, you can't realistically expect a $5 or more price without the whole market increasing its market cap 50 times or more. In the long run i believe anything is possible, but if you want faster profits, picking good low Market Cap coins is the key because the already top Market Cap coins/tokens already have a much lower chance to grow, you can not expect Bitcoin(BTC) or any big name to grow 100x as fast as a coin/token that only has a 50 to 100 millions in Market Cap so even if it grows 50x to 100x it will only reach 5 billions in Market Cap.
In the end i would pick an already high Market Cap coin for a less risky and more stable investment option while the low Market Cap altcoins are for high risk and possible high reward investments as they have a lot more room to grow.
Stay green!
About me: I have been a trader for about 10 years now, first Forex and now Cryptocurrencies, even if i mostly favor the HODL strategies on Crypto. I aim to make articles explaining the process and help everyone be a better trader and ultimately, make money, because that is why we are all here!
I have a list of topics i want to talk about but i will also look in the comments to see what you want me to talk about so please let me know!