When people discuss crypto-currencies, there are some key factors that must always be taken into account to determine their potential. Judging currencies solely on the basis of their market capitalization is no longer a viable option, although it remains the most popular indicator. There are other factors to consider for a full analysis of the potential of a cryptocurrency.
Here are some basic indicators to always consider:
Market capitalization
Even if the market capitalization itself is an incomplete indicator, people will always watch it closely. This is why Bitcoin is considered the "biggest" cryptocurrency, even though its "dominance" in the cryptocurrency market is less than 37%. Especially with respect to altcoins and tokens ERC20, it is no longer enough to look at market capitalization.The maximum offer
Most cryptocurrency enthusiasts know that most currencies have a maximum supply. In the case of ICOs chips, this limit is known well in advance. However, there are currencies that do not have a maximum supply, such as Ethereum. It is important to keep this indicator in mind, as this means that market capitalization increases as long as people are able to generate ether.
Currently, for each new coin, $ 898 is added to Ethereum's market capitalization (actually $ 996 as of January 4 in the evening).
- Total supply
Contrary to what most people expect, total supply and maximum supply are not the same thing. In the case of Stellar Lumens (XLM), for example, the total supply is 103.5 billion XLM. Although this is not necessarily the maximum bid, it is unlikely that we will see more chips issued over time. XLM is one of those currencies that can not be mined and is largely controlled by a centralized entity.
In addition, the total supply and the offer in circulation for these currencies are generally very different, which is another factor to be taken into account. The market capitalization of a cryptocurrency is equal to the current price per room multiplied by the supply in circulation, rather than the total supply.
Can cryptocurrency be mined?
When looking at sites such as CoinMarketCap.com, we notice that many currencies have asterisks next to them. This usually indicates that these currencies can no longer be extracted. In some cases, this has been the case from the first day, which often raises concerns among investors. As of January 5, 2018, five non-shabby currencies were among the top ten by market capitalization (Ripple, Cardano, Nem, Stellar and IOTA). This produces a very skewed representation of their value, which is why the ranking of currencies by their market capitalization is not the best course of action at the moment.Is there a reference exchange platform?
Although this is not generally noticed, there are currencies that are mainly traded on a trading platform controlled by the developers.
The best-known example is BitConnect, which sees more than 95% of its trading volume come from the native BCC platform. This is quite problematic because it often leads to price manipulation. Fortunately, such situations are rare, but it is always better to check if only one platform has a trading monopoly.
Yes it's good to remember this things, unfortunately most people just look at the price per coin and make their decisions with that data alone. I am amazed by the amount of friends that buy coins without knowing anything about them... A friend of mine bought reddcoins and didn't even know he could stake them to get the bonus coins haha I always try to learn as much as I can before buying into anything
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unfortunately this is the case for many people
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yeah knowledge is power :)
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Great summation. Appreciate your insight!
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@OriginalWorks
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