Investing in crypto can be tedious and have both bitter and sweet results. However, for the sake of newbies, this guide will help you put your best shoe forward in the crypto space. When investing in crypto, there is a cautionary tale you should know, and that is that price does not matter.
There are some valuable lessons behind this statement. For instance, the price of Bitcoin dropped from over $68,000 to the present $26,000 in less than a year, with ETH seeing a similar drop in the same year, from over $4,000 to the current $1,700.
The potential an investor will get in the crypto space is the price they will pay for the volatility in the market. As the saying goes, there is a high risk, high reward, or downside.
Poor investment decisions have killed many people’s dreams, and in the crypto asset industry, 2022 has seen even more dreams go down the drain. There are many issues surrounding the industry, and the current regulations that are starting to surround the crypto world will have an extended effect.
Why Price is Not an Issue
Price does not matter in the crypto space because it is a function of market capitalization and the outstanding supply of shares, tokens, coins, and the like. Some analysts argue that the common variable in the whole problem is outstanding shares. However, this is a simplistic view, and here’s why.
On a percentage return basis, equity with higher outstanding shares can severely outperform an asset with fewer outstanding shares. It is a well-known fact in the space, and you may have heard of people talking about how tokens in the crypto space had returns that most would call outrageous.
The main lesson here is to avoid chasing returns, particularly returns from tokens that have already had a huge run before. So, for example, if a coin like Bitcoin has seen an all-time uptick in the thousands of figures, do not expect the trend to continue.
That is why, in many words, price does not matter. Let’s assume that a token has a 10 trillion unit max supply. This number means that the coin would have seen an uptick of $1,000,000 to over $100,000,000 market capitalization.
Currently, in the market, the number of cryptos that exceed this number is less than 200. So if a coin were to achieve a 10,000% uptick, it would shadow the $10 billion market cap, which as of the time of the press, has less than nine in the crypto market.
Market Cap Is the Way to Go
Once you have an investment in mind, the best metric to use is the market cap. This simple concept represents the money required to buy all tokens at once. In addition, the market cap provides insight into the historical data of the token and helps you compare your preferred asset with other crypto assets in the same bracket.
For example, suppose you’re interested in investing in a particular altcoin. In that case, you can compare its market cap with other altcoins in the same category to determine how it fares against competitors. Moreover, the market cap can also help you identify trends in the crypto market. Finally, look at what other big players in your category have that you still need to get.
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