Panic! Today we will talk about two super important concepts: market cap and circulating supply. These are not some high-level mathematical formulas, but golden rules to help you determine whether a coin is worth money.
After reading this, you will be able to see through the true nature of those 'high-priced coins' like a veteran, avoiding pitfalls and transforming into a crypto expert overnight!
First tip: What exactly is market cap? Don't be fooled by the 'billionaire' illusion! Market cap, simply put, is the 'total value' of a crypto project.
How to calculate? Super easy: current coin price × number of coins in circulation. For example, Bitcoin (BTC) is currently priced at $60,000 with a circulating supply of about 19 million coins, so its market cap is 60,000 × 19 million = an astonishing $1.14 trillion! Doesn't that sound like the market cap of a company in the stock market? That's right, the crypto world borrowed this concept so you can see at a glance how 'awesome' this project is in the entire market.
Why is it eye-catching? Because the market cap is the 'celebrity ranking' of the crypto world! A high market cap means the project is popular, with funds pouring in, with 'big brothers' like Bitcoin and Ethereum firmly seated in the front row, with market caps often exceeding trillions, crushing countless smaller coins. But don't get too excited; low market cap coins can also be 'potential stocks'—think of those 'dark horses' that skyrocketed from a few cents to several dollars, with market caps soaring from millions to billions, instantly making your dreams come true!
Tip: When comparing projects by market cap, don’t just look at absolute numbers. Compare it with the total market—Bitcoin accounts for over 40% of the entire crypto market cap, and you'll understand why it is the 'king of coins'. Remember, high market cap doesn't mean guaranteed profit; low market cap means high risk and high return, trading crypto is like gambling, so act according to your capacity!
Second tip: circulating supply, the hidden 'real power' is exposed! Circulating supply is the soulmate of market cap! It refers to the actual amount of coins that can be bought and sold in the market, excluding those locked in smart contracts, held by teams that haven't been released, or have already been 'burned' (destroyed).
For example: a project has a total issuance of 100 million coins, but now only 50 million are in circulation, so the circulating supply is 50 million. Why is this so critical? Because it directly affects price fluctuations! A small circulating supply means less supply; a big buy order can push the price up like a rocket launch. But if the team suddenly unlocks a large batch of coins, the circulating supply could surge, and the price might crash, deflating like a balloon. Think of those 'air coins'—total supply in astronomical numbers, but with a pitiful circulating supply, creating a false sense of scarcity to trick you into falling for it! Don't confuse the concepts.
Circulating Supply: the 'live coins' that can be traded now.
Total Supply: the coins that have been issued but may be partially locked.
Maximum Supply: the project limit, such as Bitcoin's 21 million coins, never to be exceeded, super scarce!
To use a life analogy: circulating supply is like apples on a supermarket shelf, total supply is everything in the warehouse, and maximum supply is the limit that the orchard can produce. If there are few apples on the shelf, the price is high; if the warehouse is full, the price is low. Got it?
Why are market cap and circulating supply your 'crypto shields'? These two can help you avoid countless traps!
For example, when looking at a new project, first check the market cap: too low? It might be a small workshop that's 'harvesting leeks'. Too high? The competition is fierce, and it's hard to turn things around.
Then, check the circulating supply: if 90% of the total supply is still in the team's hands, they could 'crash the market' at any time, so run quickly! In the crypto world, data is king. Go to websites like CoinMarketCap or CoinGecko, just search and everything will come up.
For example: Dogecoin (DOGE) has a huge circulating supply (hundreds of billions), its market cap is high but price is low, suitable for memes but not for holding long; Solana (SOL) has a moderate circulating supply, its market cap skyrocketed, proving its technology is awesome, and users are enthusiastic.
Common misconceptions warning:
Myth 1: Thinking high coin price = good project? Wrong! A coin priced at $1 with a circulating supply of 100 million has a market cap of $100 million; another coin priced at $0.01 with a circulating supply of 10 billion also has a market cap of $100 million. Which is more valuable? Look at the market cap, don't be fooled by price!
Myth 2: Ignoring changes in circulating supply. Many projects have 'inflation' mechanisms, constantly issuing new coins, diluting your holdings. Bitcoin's opposite example: Ethereum had unlimited supply in its early days, now it has changed the rules, clever, right?
Crypto newbie, congratulations! Now you have mastered the 'dual swords' of market cap and circulating supply. The next time you hear a friend brag about some 'get rich quick coin', you can calmly analyze: What's the market cap? Is the circulating supply stable?
Remember, the crypto world is not a lottery, but an information war. Learn more, observe more, act less impulsively, and be more rational. Go practice, the next millionaire could be you! If you have any questions, feel free to discuss in the comments or follow me!
