If you are into cryptocurrencies
, and are looking at investing in some yourself, it comes in very handy to know which one to back. There are a few very key features, which should be taken into account. Whereas people once used to base all of their decisions on the basis of their market caps alone, this is no longer an appropriate or viable option. Below are some more metrics for cryptocurrency traders to be aware of at all times.
1) Market Capital
Although we have just mentioned that this is no longer a viable feature, when used in conjunction with others, it can still be very effective. It is after all the reason that Bitcoin is considered to be the largest cryptocurrency, even though the dominance is less than 37 percent.
2) Maximum Supply
Most cryptocurrencies will have a maximum supply, and in the case of ICO tokens, this is often known well in advance. Some currencies, including Ethereum
do not have this maximum supply, and this is important to remember, as it means that value can be added to the market capital, as long as people continue to mine and generate Ether.
3) Total Supply
The total supply and maximum supply are not the same thing and should not be confused. The total supply and circulating supply are usually very different. The market capital is equal to the current price per coin times its circulation supply, as opposed to the total supply.
4) Can it be mined?
Some currencies cannot be mined – in some cases, often from day one. This can cause concern among investors, and there are currently five different non-minable currencies in the top 10 ranked by market cap. This does not present a true representation of their value, which is why ranking currencies by market capital is not the best course of action.
5) Does it have a native exchange
There are some currencies which are mainly traded on exchange that has been controlled by the developers. An example of this, is BitConnect, which sees over 95% of its volume originate from the native BCC exchange, which can be quite problematic. These coins are very hard to come by, however, it is definitely worth checking to see whether any exchange shenanigans are taking place. Price manipulation will result in a skewed market cap, further invalidating the metric.
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