Diamonds and Pearls: A Historical Look at the Top 10 Cryptocurrencies by Market Cap

After writing Cryptosocial: How Cryptocurrencies Are Changing Social Media, I began to brainstorm my next book idea. I considered writing about the history of the top 10 cryptocurrencies as measured by market capitalization. While I did write that book, instead of publishing it as a book, I decided to make it exclusive content for Cryptocracy subscribers. You won’t find this material anywhere else.

Market capitalization (hereafter referred to as “market cap”) is a valued metric among crypto enthusiasts. However, it’s important to note that it is relative. Where one coin stands in relation to others today may be drastically different than ten years ago, and ten years from now. It's an important metric, but not the only metric.

In the early days of crypto, market cap didn’t mean as much as it does today. With fewer cryptocurrencies to compete against, it was difficult to measure competitiveness, especially when different cryptocurrencies held wildly divergent values. In April 2013, for instance, bitcoin’s price was $134.21 while its circulating supply was more than 11 million BTC. Terracoin’s price and circulating supply were 64 cents and 5.4 million TRC, respectively. This disparity put bitcoin’s market cap at $1.4 billion versus Terracoin’s $1.5 million. And there were less than 10 cryptocurrencies listed at the time.

The one thing bitcoin had going for it then is its first-to-market status. Terracoin was a few months old. 

Over the years, Cryptocurrencies with large market caps have attracted investors, traders, and HODLers alike. If anything, market cap is a measure of the market’s confidence in a certain cryptocurrency. But that can be misleading. It’s important to understand how market cap is calculated.

Market cap is a cryptocurrency’s price multiplied by its circulating supply. If a coin’s price is 5 cents, for instance, and its circulating supply is 100,000, its market cap is $5,000 (100,000 X $.05). Pretty simple, right?

Of course, cryptocurrency values fluctuate from day to day and minute to minute. Sometimes, they fluctuate wildly. That’s because the value is based on supply and demand, among other factors. On any given day, bitcoin’s market cap can rise or fall by thousands of dollars, or millions, depending on market forces acting on it that day. As a result, bitcoin’s market cap changes from one minute to the next, making it difficult to judge the relative value of bitcoin against other cryptocurrencies at that precise moment.

Another factor that complicates things is that circulating supply isn’t accurate. It measures the total number of coins or tokens that have been minted. But many of those coins are locked up somewhere in a vault. They may be in an account with a future promise to pay founders or early investors, in escrow, or lost because the owner can’t find their keys to access them.

It’s better to judge market caps by trends than by momentary ground truth. If XRP, for example, moves against the market—price and market cap rise as the rest of the market declines—then that may be a signal that investors and traders feel good about XRP right then. They may feel differently tomorrow, or next week.

Cryptocurrencies hold certain values for many different reasons. Market maturity is one factor. Utility is another. Were it not for Devcoin, a dead cryptocurrency with no relevance today, many early crypto projects might not have seen the light of day. Devcoin had an early relevance factor that today’s market can’t support. 

While market caps don’t tell the whole story behind a crypto project’s presence in the market, they do add to the story. Anyone interested in researching a project’s value and relevance should consider market cap but not rely solely on market cap analysis. Serious investors go beyond market cap and delve into project fundamentals.  For that reason, the next installment of this series will compare technical analysis and fundamental analysis.

As usual, I’m not giving financial advice. Everything published in this series, titled “Diamonds and Pearls: A Historical Look at the Top 10 Cryptocurrencies by Market Cap,” is for information purposes only.

Read the entire series exclusively at Cryptocracy.