"Look at the market cap not at the price." What does it mean?

[Vicrypt]

I see people saying to look at the coin's market cap and not it's price. What does it mean exactly? Can someone please explain this to me? and give me an example.

Also, how can we say or assume that coin is undervalued? What parameters do we use to make our assessment.

Thank you everybody.

[COINISM0001]

I dont prefer this as the KPI. I see supplym it should be less than 100 Mil-150 Mil , Price is below $1 and the coin has a unique value then its worth it

See $POWR Power ledger $PRG Paragon Coin $OK OKCASH are such projects which have thes qualities

I see people saying to look at the coin's market cap and not it's price. What does it mean exactly? Can someone please explain this to me? and give me an example.

Also, how can we say or assume that coin is undervalued? What parameters do we use to make our assessment.

Thank you everybody.

[tsaroz]

It's generally thought that coins with low supply (short issue period) would have higher value sooner.  Bitcoin is already issued 80% by volume that may justify it's rise. But it's not always the case.

[Agozyen]

The market cap is the price of all the coins.

So, if you are researching your coins and you see COINX trading at $1 and there are 1,000,000 coins, then the market cap is $1,000,000.

Let's compare this to another made up coin, also priced at $1, but with 1,000,000,000 coins.  COINX2 has a market cap of $1,000,000,000.


Both coins are the same price in USD, but there are many more of COINX2.  The first coin has more potential because it is rarer and has a small market cap.  There is room to grow.  It also has the potential to fail. 

Now that you understand the relationship to Coin quantity and price, let's look at a real coin.

There is a post floating around here that claims Doge will be $1 by the end of 2017.  This is not possible.  There are 112,356,828,424 DOGE in circulation.  1 Doge = $0.000375.  In order for Doge to hit $1 it's market cap would have to be $112,356,828,424.  Currently, the market cap is $421,435,857. 

Doge would have to find itself $112 Billion dollars. That is 1/5th of the current total market cap.  There is no way it's going to climb up the chart to reach the number two position. 

So when you look at the price you must also look at total coins and the marketcap.  Smaller cap coins have more potential for reward and risk.  Also, don't forget that the price can always go lower, even if it's 1 satoshi.

[MoonIsBlue]

I see people saying to look at the coin's market cap and not it's price. What does it mean exactly? Can someone please explain this to me? and give me an example.

Also, how can we say or assume that coin is undervalued? What parameters do we use to make our assessment.

Thank you everybody.

Marketcap divided by oustanding shares, or in this case coins = price. Or, price*outstanding shares, in this case coins = marketcap.

Price is purely psychological, cheap and expensive is relative. Ripple is now 80 cents, which could seem cheap but given that it has a 30 billion marketcap is it really cheap? Well depends, how much can it still grow from that 30 billion marketcap? If you think it can still go 10x then 80 cents is a bargain. Same for Bitcoin, we hear price predictions from 100k-1m or even 5m so the current price which you may find, because ofcourse it is a huge number is expensive, but thats relative, if the price hits 1m I bet you wish you would have gotten in at 17k-18k w/e it is right now.

So lets say Bitcoin is the new gold, gold has a 7 trillion marketcap which means 7,6 trillion / 294 billion = 25. So if Bitcoin grows to the same cap of gold it can still go 25 times from its 294 billion marketcap which would put the price excluding new coins coming into circulation at a price of $425000 and given that Bitcoin also is being traded, exchanged for online goods or physical goods where as gold isn't and serves multiple functions it could even go well beyond that.

This is why marketcap is important to look at. It can give you an estimation of how big something could potentially grow whereas price doesn't and is a mere represenation what the markets expectation of the future is.

Undervalue:

What Warren Buffet does when he picks his shares is he goes trough the quarterly or yearly results of companies and looks at their revenue and profits, because he's very in tune with the market he can determine if a stock price is then corresponding its current returns, if it the dividends are actually quite high in contrast to its value on the market he buys it and thats how amassed great fortunes, or one of the ways. It is how he started.

In crypto not everything gives dividends but tokens and coins can play a crucial role in the ecosystem, and I can be completely off here. But imo Ethereum is overvalued for what it currently does, but in the same time you could say its undervalued but then you're going ahead of yourself with expectations of the future putting a lot of trust into Ethereum's team that they will tackle things such as scalability and smart contract utility, start legal processes for onboarding clients so that the community doesn't get hit by scams etc.

And well if you do think Ethereum is overvalued, then you can look at its competitors, what do they do what Ethereum doesn't? Such as that Waves has tokenomica a legal framework for ICOs being held on the Waves platform.

NEM has onboarded a lot of clients already who actively use NEM's technology but isn't really noticed by the market.

I called ADA on this very reasoning, the market ignored it at first, I personally was a bit skeptic at first but I went ahead and look into it and I quickly changed my mind, its now gone 10x from where I bought in. So when it comes to overvalued/undervalued its about being right a lot. And assuming from public sentiment ADA is now more ''officially accepted'' it seems. But there were a lot of people who said Supply is to big, how will it ever go up? Didn't take very long though for it go 5x and another 2x (10x).
Maybe I had some beginners luck with ADA, as I can't really tell you any other coin that is really undervalued currently for what it does, Waves has sharply appreciated and NEM also.

But just to give you a taste of what its about. Mostly, its about being right.

[seaqrioy]

I see people saying to look at the coin's market cap and not it's price. What does it mean exactly? Can someone please explain this to me? and give me an example.

Also, how can we say or assume that coin is undervalued? What parameters do we use to make our assessment.

Thank you everybody.

The total market capitalization can well show where an altcoin is currently in all altcoin. Of course, when we invest in value, the total market value is often not so important, and I like the update frequency of github.