The fully diluted value market cap may be a good metric for long-term investors, as it allows them to better judge whether a project’s value is reasonable. In the cryptocurrency space, many people are afraid of the increasing supply of coins or tokens. The fully diluted market cap can be used as an indicator of the impact of future supply into the market. ![]() With these concerns, should investors then look only at the current market cap of a cryptocurrency and not care about its fully diluted market cap? Should investors care about fully diluted market cap? Hence when investors look at fully diluted market cap, they should be mindful that the metric does not take into account the impact of inflation towards the fully diluted market cap. In theory, the supply of the token increases, it should push down the price of the token due to oversupply, causing token inflation. ![]() The problem with the fully diluted market cap is that while it shows a higher market cap, it ignores any potential decrease in price of the token with the eventual increase in its circulating supply.įully diluted market cap assumes that the market cap in the future will increase in direct proportion to the current circulating supply at any given time. The implications of a fully diluted market cap Hence the market cap and fully diluted market cap of bitcoin is: Bitcoin Maximum supply of a token x Current market price of the token = Fully diluted market capitalizationįor example, the amount of Bitcoin in circulation is currently 18.782 million, while the total amount of Bitcoin that will ever be minted is 21 million. It is the sum of the maximum supply of the coin multiplied by the current price of the coin. A fully diluted market capĪ fully diluted market cap on the other hand, measures the market cap when all of the coins are issued. Bitcoin Market Cap vs Fully Diluted Market Cap. Market cap is often used to rank the popularity and size of the cryptocurrency - a cryptocurrency with a higher market cap is often regarded as more popular, as there are more crypto holders willing to hold the coin at the current price, contributing to a higher network value.Ī cryptocurrency with a higher market cap is also more likely to be a more stable investment than another one with a much smaller market cap as the smaller market cap cryptocurrency is more susceptible to price movements. Market capitalization (market cap) is the total network value of the crypto at any one point of time, or the sum of all the coins currently in circulation multiplied by the current price of the coin.Ĭirculating supply of coins x Price per coin = Total crypto market capitalization Here’s a look at the difference between the market cap and the fully diluted market cap of a cryptocurrency and why it matters. While both may be somewhat similar in value, they represent two different meanings. ![]() When valuing a cryptocurrency or blockchain protocol, one common metric that often pops up is the market cap and the fully diluted market cap.
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