Selecting a cryptocurrency with the potential to rise to the moon has been a constant headache to investors especially the newbies. In recent times, most people ask 101 questions about Cryptocurrency trading mostly ” how to choose a cryptocurrency to invest. This article will walk you through one of the most important things to not overlook when selecting a coin.
Following the recent bull run of Bitcoin and some selected altcoins, the sense of investment of many people have been awaken. To many, Bitcoin is far gone, and to get a fraction of it is not in their book, hence they have to flip through thousands of cryptocurrencies to find an equally potential coin to buy and to diversify their portfolio. The mistake they end up doing is buying cryptocurrencies or tokens with less than 5% success rate. As an investor, I rate success rate by how fast a coin respond to change.
It is worth noting that some coins rise faster than others. Though the less fast rising ones have an impressive price stability, I will go in for the fast-rising ones because that is what every investor is looking one (Buy them cheaper, sell them higher).
To find a coin that has the potential to rise faster, there are two important things to check about the coin before adding them to your portfolio, and one other thing to check which is not much important but important.
1. Available Supply
Yes! Available supply is one of them. This largely answers the “how to choose a cryptocurrency to invest question”.
Available supply according to CoinmarketCap is the approximate number of coins available in the market. To prove that the available supply is one important factor to determine how fast a coin may rise, I will give you a small example.
Bitcoin has an available supply of 17 million, Dash has an available supply of 8 million, Bitcoin Cash has an available supply of 17 million, Bitcoin SV has an available supply of 17 million, Litecoin has an available supply of 61 million, Ethereum has an available supply of 106 million, Monero has an available supply of 17 million, Zcash has an available supply of 6 million, Bitcoin gold has an available supply of 17 million and the list goes on.
You can check any cryptocurrency that is trading around $90 or above. They all have less than 200 million available supply.
Why does Available supply matters? (how to Choose a Cryptocurrency to Invest)
Because available supply is used to calculate the price of Bitcoin. The price of a cryptocurrency is calculated by dividing the market capitalization by the available supply. Price = Market Cap÷ Available supply. Since the Available supply is the denominator, number of market cap has to be equal to the number of available supply for the coin to trade at $1. This means, the smaller the available supply, the faster it is for a coin to trade at $1 when market cap keeps rising.
How to choose a cryptocurrency to invest: some coins have an incredible market cap but are still trading less than a dollar because the available supply is very huge.
Do you wonder why XRP is ranked 3rd on the coinmarketCap rankings with a market cap of $18 billion, but trading below $0.5 whiles Dash is trading at over $160 with a market cap of mere 1 billion? We can say that XRP is doing well than Dash but Dash investors are having their investment rise more faster.
The secret lies in the available supply. XRP has an available supply of 42 billion while Dash has an available supply of just 8 million. As I pointed out earlier, the market cap has to be equal to the available supply to reach a dollar. When it doubles the available supply, it trades at $2 and so it goes. The market cap of XRP has to reach 42 billion before it trades at $1. Assuming XRP had the available supply of Dash, which is 8 million, XRP would be trading closed to $2500.
The XRP price= Market Cap÷ Available supply.
XRP Price = 18 billion ÷ 42 billion.
XRP Price = $0.42. ( Note, to get the exact price, use all the numbers in the market cap and the available supply. I just used an approximate that’s why I missed it but points.)
The Litecoin Price = Market Cap ÷ Available Supply.
Litecoin Price = 7 billion ÷ 61 million
Litecoin Price = $114.
The available supply always matters in answering how to choose a cryptocurrency to invest question. but there should be a good factor for the market cap to keep rising to reach and outrun the numbers of the available supply. A typical example is the pending Bitcoin halving which can send the market cap rising to record an insane price.
Can XRP ever reach $100?
From the calculation, we can tell that XRP need a market cap of $420 billion to reach $10 dollars. With that market Cap, Litecoin would be trading around $6800 while Dash would be trading at around $52500.
In reality, XRP can hit $420 billion market cap to trade at $10, but to trade at $100, it needs to do the impossible. Maybe not anytime soon.
From this observation, it is advisable not to hold just one XRP and hope to be a millionaire. Maybe you need to buy a bunch of them to hit a jackpot when it reaches that price height.
The available supply matters in the world of investment. The smaller the available supply, the faster the price rise to the moon. The larger the available the supply, the slower the price rise and the more you need to buy that coin to hit a jackpot. It is important to understand that any coin that rises so fast also fall so fast, but that is normal in the industry.
Apart from available supply? (How to Choose a Cryptocurrency to Invest)
Okay. Apart from the available supply, check on the team behind the coin. Check from their social media pages to verify whether they are still active or have given up on the coin. If it happens the team is still active, I will advise you to buy more especially when the price is cheap.
Remember that Bitcoin was once trading at $0.5. Check the plans put in place by the team to make their a coin a success. Bitcoin , for instance, can be sent and received using WhatsApp Messenger and many more. In this case, there is a reason for the market cap to rise as more people accept the development.