There are many variables to consider when taking your initial position on a cryptocurrency. Before you take a position you should understand the relationship between Market Cap, Supply, Volume, and Hype. These are variables to consider when deciding if a project is right for you and whether it will give you the gains you are hoping for.
Market Cap
The most important variable for coin metrics is the coin's market cap. The market cap will determine where your coin of interest stands in the market and how many multipliers it can achieve. The higher the market cap, the less ability the coin has for growth. The lower the market cap, the more room for potential growth. This does not mean a lower cap coin will see more multipliers than a higher cap coin but it is the first thing you should assess. The market cap is equal to the price of the coin multiplied by the circulating supply.
(Price x Circulating Supply) = Market Cap or
(Market Cap ÷ Price) = Circulating Supply or
(Market Cap ÷ Circulating Supply) = Price
Supply
The second variable that should be considered is the Supply. This can be divided into three categories:
Circulating Supply (CS)
CS is the total number of coins currently available in the markets.
Total Supply (TS)
This is the number of coins that have been created including those not available to the market yet.
Max Supply (MS)
This is the maximum amount of coins that can ever be created.
The CS can determine the volatility of a coin. The higher the CS the lower the volatility in price. This means the price will fluctuate more slowly (for better or for worse) for coins with higher CS. Coins with a lower CS will have potential for higher volatility and are subject to labile prices. This does not mean a high CS will prevent volatility or that low CS will have increased volatility. These can be altered by Volume/Hype.
Volume
The third variable to consider is the 24-hour volume. This is the amount of money going into a coin in the last 24 hours. It is a good indicator to see what people are excited about. The volume shows where people are putting their money. Although not always true, typically a coin with higher volume has higher volatility. The higher the volume the more potential there is for the price to rise or fall rapidly. The volatility of a coin can be calculated using excel for a given time period but for today it is important to understand how it can affect coin value.
Hype
This is more of a subjective variable. This is where it is important to get involved in social media. If you find a project you are interested in then join their Telegram or other social media platforms to see what others are saying about the project. See how many followers they have. Make sure it is something people are excited about. The more people interested the higher the likelihood of increased monetary value.
Now you should understand the basics of coin metrics and how important they are to consider before making a purchase. This is the first thing to understand before deciding to invest in a project as you want to make sure you are going to make profits.
Thank you for reading and good luck!
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