If you think a cryptocurrency is “cheap” because of its price check the market capitalization.

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If you think a cryptocurrency is “cheap” because of its price check the market capitalization.

A mistake I see being done over and over by new comers investing into cryptocurrencies is thinking that because it’s price is “cheap” it’s a good opportunity and it can multiply by 100x or 1000x to be like Bitcoin one day.

Long story short: No!

If a crypto appears cheap like ADA / cardano at $1.5 check it’s market capitalization (calculated by multiplying the volume of coins with the price). In this example ADA has a market cap of $50 billion. This means that for its price to double and go to $3 an addition $50 billion has to be invested!

Put differently if people invested an addition $700 billion in Ada now it’s maker cap would be the same as the market cap of Bitcoin and ADA would be worth only $22,5! Nowhere near the current price of Bitcoin at $40,000! This is due to massive differences in volume of coins between Bitcoin and ADA.

A good exercise would be to calculate the market capitalization of Doge and compare it to the one of Bitcoin if Doge was worth $40,000.

So please be careful when buying “cheap” coins, check the volume and market capitalization.

Edit: as rightfully pointed out in some comments my example is over simplified as coin volumes are not all necessarily made available for purchase or listed on exchanges and that is also the case for ADA. However it is still important to look at price Vs volume and market cap.

submitted by /u/wiptheman
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