Economic size (or market capitalization), as well as asset supply, influence the valuation of each day, but could any crypto be worth up to 1 million someday?
During the first quarter of 2021, one Bitcoin (BTC) was worth over $47k, while one DOGE hovered at $0.06. If you are new to the world of cryptocurrencies or markets, you may initially think, “DOGE is cheaper than Bitcoin, and if it picks up enough steam, maybe it could catch up to BTC and go up over $20,000.” This kind of statement is far from feasible, because of the economic size and asset supply that each crypto gets.
This market measure is the combined dollar value of the supply in circulation. It changes according to the interactions of the value of a given crypto. Websites offering industry “metrics” have established a ranking in terms of economic size. BTC is the most prominent in this category, as it exceeds $944 billion.
This economic dimension takes into account the circulating supply of each asset. The circulating supply is the amount of any asset that moves freely in the market. If you multiply the circulating supply by the price of the asset, you get this indicator.
Relationship between “supply” and the economic dimension
Assets with more circulating supply tend to trade at cheaper prices in terms of dollar value per coin or token. For example, BTC has a relatively low supply, this indicator can grow by mining jobs, even though its upper bound supply remains low. On the other hand, DOGE has an outstanding supply of about 128.3 billion.
Given DOGE’s outstanding supply, its market capitalization would reach approximately $800 billion if each coin were priced at approximately $6.2. Meanwhile, Bitcoin is worth more than $40,000 per coin near that same metric due to its smaller supply.
Reaching a price of even fifteen hundred dollars per DOGE would demand the asset to have a capitalization in excess of $192 trillion. However, during the first quarter of 2021, the entire market demonstrated an economic size of close to 1.5 trillion.
Commonly, assets in short supply can rise more in price per currency than assets in opposite conditions. The YFI, for example, had a circulating supply of only about $36k. It went from about $900 in mid-2020 to $40k in the second half of 2020. A multitude of other components play a role in the rises, but typically, if an asset has a comparatively higher supply, its value cannot be directly compared to that of currencies with a lower supply.
What is the discrepancy between total and maximum supply?
According to expert statements “the total supply is related to the number of coins or tokens that exist and are circulating”, it could also be defined as the sum of cryptos that have been issued (or mined) minus the sum total of those that were discarded.
The maximum supply, on the other hand, is the total supply of an asset at all times or, more specifically, the total number of coins or tokens that have been or can be created. This means that once the maximum supply is reached, there would be no way to produce more coins or tokens.
Understanding the concept of market cap in relation to the price of any asset can be important, allowing you to evaluate the cryptocurrency space more realistically. You may see the price of a single Bitcoin as too expensive, immediately shifting your focus to something cheaper.
Investing in cryptocurrencies requires a great deal of information. Assets vary in their use cases, adoption, profit potential, and associated risks, among other factors. However, viewing each asset in light of its particular economic dimension, price and supply can help evaluate the market. Without a doubt, this is information you can analyze in the best trading applications.