Thing is, price is an important asset indicator but more often than not, it’s misleading. It even more flawed in cryptocurrencies where investors and coin enthusiast compare two cryptocurrencies. Thereafter, they make investment decisions based on these spurious indicators.
Different blockchain projects have different amounts of circulating tokens or coins in this case. Bitcoin has a total supply of 21 million BTCs while others as EOS has a total supply of 1 billion employing different consensus algorithms and hashing functions. From this its easy to see why using price as a criterion for making investment decision is flawed to say the least.
The Illusion of Price and the Reality of Value
Savvy investors make use of different filters before channeling their hard-earned money to any blockchain project. Top of the list is market cap and its importance can never be underestimated. Looking at different coin trackers, the top 10 is dominated with coins with billions in total supply.
Straight from XRP, EOS, Tron, Cardano and Stellar these coins have high market caps yet their prices are in cents. None of them are above the $1 mark. Surprisingly, they are attractive to investors due to perspective. Bitcoin costs upwards of $6,000 and many see this as expensive. But at less than $1, some investors who anchor their investment decision based on price while forgetting value find it cheap.
Remember, if ADA prices shoot to a mere $4, then it’s market cap will be much more than that of Bitcoin. It might take ages before than happens but at the moment, users are contended with small price movements.
Normalizing BTC with XRP (or any other coin) High Coin Supply
Coin creators behind this “high supply, low price” drum beating is playing with human psychology. As a result, they are exploiting those who want to invest cheap regardless of value. After all, the human mind has a hard time processing huge numbers and by keeping supply high, prices are guaranteed to be low. It’s so rampant that 15 coins in the top 100 have coin total supply close to that of BTC.
Now if we normalize market cap and calculate prices of these coins based on the market cap of XRP then we can get some very interesting results.
Here’s the formula:
Normalized Cryptocurrency Price = (Price of a cryptocurrency) * (Current Circulating Supply of cryptocurrency) / (Current Circulating Supply of XRP)
Normalized Price of Bitcoin based on XRP circulating supply= 6286*17319850/39997634397=$2.72
Spot price of XRP is $0.42
Therefore, Bitcoin would be 6.5 Times more valuable than XRP is at spot rates.
You can use the same formula to calculate the normalize coin price of any coin.
The post The Fallacy of High Supply, Low Price: Bitcoin Would be SIX TIMES more Valuable than XRP with Same Circulating Supply appeared first on Ethereum World News.
Source: Ethereum Worldnews
Original Post: The Fallacy of High Supply, Low Price: Bitcoin Would be SIX TIMES more Valuable than XRP with Same Circulating Supply
