Understand Price of Coins
What is market cap? This post teaches you what it is and how to understand the price of cryptocurrencies.
A price of a crypto currency DOES NOT EQUAL its size. Market Cap represents size. There is a misconception that just because a coin costs a small dollar amount, that it is a small coin with a lot of potential to grow. THIS IS FALSE! For example, one Tron(TRX) costs about $.07 right now. However, it is the 14thbiggest crypto currency, valued at $4.5 billion. Monero is the 13thbiggest crypto currency but each Monero costs about $314. The difference between the two currencies is that Monero has a circulating supply of 15 million and Tron has a circulating supply of 65 billion.
A good way to measure the earnings potential of a cryptocurrency is to find a similar and more popular crypto currency and use its market cap as a benchmark. The example we used compared Icon to Ethereum. In an over simplification, both Icon and Ethereum aim to create a network for decentralized applications, except Icon’s market cap is about 30 times smaller than Ethereum’s. That benchmark does not mean that Icon will increase 30 times in price, but it could give you an understanding of its potential if Icon had the technology, team, and mission to compete with Ethereum.
Similarly, one could compare Ebay and Amazon. Amazon’s market cap is about 15 times greater than Ebay’s market cap probably because Amazon offers a wider range of products and services. However, if one thought that Ebay had intentions to expand its product offering and could do it effectively, one could estimate Ebay’s growth potential given Amazon’s current price. As a relevant side note, Amazon’s price is about 34 times greater than Ebay’s price ($1300 vs $40) but Amazon’s market cap is 15 times greater than Ebay’s market cap ($658 billion vs $42 billion).