Hello,
This article may seem obvious for people who are in the crypto market for some time, but for the new this concept can be very helpfull and save them a lot of trouble.
If you are new you might find it strange to look at Bitcoin and see that it's almost 50k a coin and see ADA in the third place value only at 2.5$ and after that you see coins with more value than ADA but bellow in rank. Why does this happen you may ask.
This happens because it's market cap. that determines the position of the coin in the rank. How is this calculated?
You just have to multiple the price of the coin for the total amount of coins available. Lets take the example of Bitcoin and ADA as if all the coins were circulating right now. The total amount of Bitcoin that can ever exist is 21 million coins, while for ADA is 45 billion. This means that Bitcoin is more scarce than ADA making it more valuable per coin. So at the price of 1$ dollar per coin Bitcoin, Bitcoin would have a market cap. of 21 million and ADA 45 billion. This is why Bitcoin has more value per coin than ADA, it's just a matter of being more scarce. How can this avoid you some money loss you may ask?
It's simple, look at Shiba Inu, some people said that it would be valued at 1$ per coin. Lets do some math, the total amount of coins is 1 Quadrillion, multiple it by one and you would get a 1 quadrillion market cap! Does this seem possible to you? Shiba would be more valuable than every amount of money in the world. Do you see where I'm getting?
This helps avoid some coins that promise you the world but with some simple math you can refute their claims right away and maybe you won't fall into some shiller scam.
In conclusion, market cap. can put some perspective in your investments like compare how much a coin would be valued if it had the market cap of Bitcoin or Ethereum, that can put the potential of coin right in front of your eyes. There's a site that you can use to compare this type of thing called the Coinperspective, use it to see the potential of your favourite coins.
Best Regards,
Cryptopeach
