With Bitcoin’s exponential growth and its overall success, new investors are looking to invest in cheaper digital coins in hopes of catching the next coin on its path to reach $3,800.
Investors prefer to buy coins which are as cheap as a fraction of a penny hoping to see the same results as was seen in the case of Bitcoin (BTC) and Ethereum (ETH). But, they often ignore one key ingredient: Circulation Supply.
At the time of writing this post, BTC has a circulating supply of 17.5 million coins, with the highest amount of bitcoin being capped at 21 million coins depending on the code.
With the existing price of around $3,800, that brings the market cap to roughly $68 Billion, market capitalization measures the total sum of coins in circulation times with the current market price (17,583,862 BTC x $3,878.74 ~ 68,190,216,836). This gives Bitcoin the largest market capitalization of any coin, at the time of writing (March 3rd, 2019).
What tends to happen is that new investors buy into crypto projects with billions of coins in circulation hoping that they would rise to prices similar to BTC. But, that’s impossible! Here’s why?
Imagine a project, ABC, that has 50 billion coins in circulation. Let’s say today, 1 ABC = $0.10, that would bring the market capitalization of ABC to $5 Billion (50 billion x $0.10).