Cryptocurrencies are the biggest phenomenon of our time. People think we are lucky to be living in the age of crypto. Ever since the Bitcoin was introduced, getting decentralized in 2009, things in the industry have been turbulent and constantly evolving.
There are hundreds of cryptocurrencies known today. More and more get released quite often, thanks to a practice many have adopted. Start-up technological companies and crypto geniuses have found a new way to fund their initiatives. Through crowdfunding, something you will get quite familiar with if you follow closely Altcoin news.
Crowdfunding & ICO
ICO is the process of initial release of a given cryptocurrency. The abbreviation stands for Initial Coin Offering and it exemplifies the first time a coin is listed on the markets. Start-ups have utilized the power of crowdfunding in combination with ICO in order to raise capital. Early backers of the cryptocurrency project are the first to receive units of the asset when it’s released.
Given the number of cryptocurrencies which are known today, it is not surprising that most of them fall to the bottom of the charts. Some seem superficial, others have not been properly introduced, but most of them come with nothing new or innovative to offer in terms of blockchain network.
But there are those that rule over the industry at the top of the almost every cryptocurrency list. Because they have been introduced early on, come with something special to offer on their networks or just have managed to gain people’s attention and trust.
2 Determinants for Market Cap
Most cryptocurrency charts feature as their first characteristic of a cryptocurrency its market cap. Market capitalization is a corporate term that defines the total market value of a company. In the case of the crypto assets, market cap encompasses the total market value of the circulating supply. In other words, market cap is determined by two factors:
- Circulating Supply – this is the number of units that have been mined or released and are circulating the industry. Those that are available for buying and selling, for making transactions with.
- Price per Unit – the price of the cryptocurrency is what exemplifies its value, both inherent and perceived. It is the price at which you will be able to sell or buy a given amount of units or fractions of a unit.
When you multiply the circulating supply by the price per unit, you will get the total market value or the cryptocurrency market cap. Just like the outstanding shares of a company multiplied by their value give the corporate market cap.
The circulating supply changes slower than the price per unit. This is due to the fact that in order for the supply in circulation to increase additional units of the currency need to be mined or released. The same does not apply to the price of the asset.
Prices in the cryptocurrency industry are heavily influenced by industry conditions, investors’ behavior, and investment climate. Changes in them can be sharp and sudden in both upward and downward trend.
Keep In Mind!
Cryptocurrencies have a limited maximum supply and you should remember that once all units have been released into circulation, the supply will no longer be a leading determinant of market cap. The price will be the only important element and you should have at least some idea how it is formed.
What Drives the Value of Cryptocurrencies?
Cryptocurrencies are decentralized payment resources meaning they are not subjected to any financial authority. This implies that no law or government can regulate the price of cryptocurrencies. There are several other things that determine it:
- Supply & Demand – these two factors are decided by the people that participate in buying and selling cryptocurrencies. When the supply on the exchanges increases but the demand cannot meet it, the price gradually falls to attract attention. In the other case, when the demand for a cryptocurrency is huge and given the limited supply that cannot meet all of it, the price rises. Just like with scarce goods.
- Traders’ Perception – the main reason why the value of some cryptocurrencies spiked in the last two years is the fact that more people got interested in these assets. They realized the potential behind both the currency and the networks – the blockchains, it runs on. This perceived value greatly influenced the price, alongside the realization that the cryptocurrencies can store value too.
- The Cost of Mining – the mining process requires a sophisticated and expensive software and hardware infrastructure. To add to that, it consumes incredible amounts of electricity that also increases the price of the final ‘product’ when new blocks of the chain are added. This is the cryptocurrency itself.
Of course, even though governments and financial authorities cannot directly regulate the price of cryptocurrencies, they can still exert influence. Some countries have banned cryptocurrency trading and allow no access to exchanges. This affects investors’ behavior and might lead to a decreased demand, thus reducing the price.
Top Cryptocurrencies by Market Cap
Basically, ever since the dawn of the cryptocurrency industry, there have been four undisputed leaders by market cap. They are among the most sought-after assets on the cryptocurrency exchanges and are immediate competitors, each offering something slightly different from the other.
- ✓ Bitcoin Price & Market Cap (BTC) – as we’ve already cleared that out, the Bitcoin is the most expensive cryptocurrency. Despite the fact that its circulating supply is not the biggest among cryptocurrencies, because of its high price it has the biggest market cap in the industry. At the time of writing this article, its price is a little over $7,551 per unit.
- ✓ Ethereum Price & Market Cap (ETH) – the circulating supply of Ethereum is significantly bigger of that of Bitcoin, more than 5 times the amount but its price is also 10 times lower than that of the leader. At the time of the article, it is a little over $570 per unit. That is why at the current moment Ethereum lands second in the list of cryptocurrencies by market cap.
- ✓ Ripple Price & Market Cap (XRP) – it might come as a surprise to you but the price of Ripple is incredibly low. It costs less than $0.62 per unit XRP. But its circulating amount is huge, nearly 40 billion units in circulation. That is why it is a recurring presence at the top of the cryptocurrency lists.
When it comes to investments, don’t hesitate to expand your portfolio. You don’t have to buy only the industry’s leading assets. On the contrary, many traders turn to less lucrative cryptocurrencies to use as a buffer for their investments, when the bigger ones crash in value. In this way, they can balance their portfolio and limit unpleasant surprises as much as possible.
Either way, the variety of cryptocurrencies nowadays is huge. Do some research, consult yourself with someone who knows more about crypto than you and make a choice. If you store your assets in a hot wallet, you can sell them almost instantaneously if you are not satisfied with their performance.
But the best and the most lucrative assets always keep in a cold storage. If you make smart and reasonable investment decisions, they will continue to increase. As well as your wealth.
Hello, I am Collin Tyusm. I am a Forex blogger. I have created my blog, because I want to help people learn more about Forex & CFD Trading Software and Bots.