hello everybody
I'm gonna present you what my last research was about, based on a mistake of mine regarding the potential of a coin (and the incomplete info offered by some coin data providers):
What is lurking behind the circulating supply?
So, I was going to take the train for my next gem, like many others, on the first day of Binance listing: SUSHI (it doesn't matter the whole story behind this project).
What I did: I compared the price with the total supply and it seemed to me very fair (about 23 million tokens - nowadays are 151 million) for a new & hyped project (30 seconds check), so I plunged into Binance foo...pools of buyers to take a slice from this new cake. The price was about 10.5 $ at that time, decreased until 9.9$ and increased after that at 10.8 $. A normal behavior for a new listed token. I was going to sell it upper, maybe at 18 $, so I kept my position.
Here is the info you see at the first sight on three of the most important websites for cryptocurrencies: coinmarketcap, coingecko and coinpaprika
But in the next day, and the day after that, the price kept going down and down.
Then I started to see what other things could influence the price. What I found after reading in depth:
- the supply is not limited!!!
- each day, 6.5 million of new SUSHI were minted and threw in the market (25% from the initial supply of Binance's day one of listing)
- this will take 14 days - so we will have more than 100 million tokens after that period!!!
- from the 15 day - 650.000 new SUSHI tokens are minted everyday!
This info is resumed also on coinmarketcap detailed info about SUSHI
In other words, if you are going to invest a bigger amount into a project, don't skip the deep research before making this investment. Otherwise, you wouldn't know what hit you.
That was the intro and the reason of this article.
The content
I am going to show you the most important coins that are hiding a lot of supply which, sooner or later, will be deployed into holders head.
There are three types of coins regarding their supply:
- premined (all suplly is already out - maybe a port of it is locked or kept by the team and/or the project)
- fixed supply (like Bitcoin - with 21.000.000 max supply - but not reached yet, work in progress)
- unlimited supply (like Ethereum - where at each block, new 5 ETH are mined - we have almost 18 million ETH each year)
Keeping that in mind, the next question is how this affect the market?
Well, more supply means more offers and if the demand doesn't need it, the price will decrease.
Some projects have an accelerated rate of releasing new coins in the market, some of them, not. This is another factor that influences the price. If more than 1% from total supply is newly depleted, be sure you will have a dump in the price course.
This is how the price and your investment will go:
That's why I made some snapshots to see how the situation is now for some coins and I'm inviting you to deeply study the supply way of releasing for your preferred projects.
For this, coinmarketcap is helping you identify the first two categories of coins reminded by me (premined and with fixed supply). Look at what is showing when I press the "?" symbol near the circulating supply for Ripple (XRP):
More than 45% are released, the rest are premined(it's what I tell you, not CMC) and ready to be released at team's will. That means, anytime, but anytime, you could see a big dump of it. Be careful.
The easiest way to check how many coins are out from the total supply is to verify the bar below the circulating supply number:
As you can see above, Loopring and Qtum are almost full, so the big part of the coins are already released. This is a good point for their future market cap evolution. But let's take a look at Hedera Hashgraph, Celo, Ocean Protocol, Hedge Trade or others like them:
- Hedera Hashgraph (HBAR) has released 6 billion tokens from a total of 50 billion!!!! so, a little more that 12%. The rest of 88% is not yet out!!!!
- Celo (CELO) - 124 million released from 1 billion. Also, almost 88% is waiting for dumping the market.
- Ocean Protocol (OCEAN) - 414 million out from a total of 1,4 billion. 72% from this supply is unreleased.
- Hedge Trade (HEDG) - only 339 million out from 1 billion. 67% more to flood the market.
You can check every coin you want. Be my guest.
This was the easier part. For the rest of the coins/tokens that are in the last category, with unlimited supply, waiting to be mined, you need to make a deeper research to see their policy regarding minting new coins. I showed you two examples, one was with the SUSHI and another with Ethereum.
Conclusion:
However hyped is a project, please consider studying is supply policy. Could save you from (easy to do) big mystakes.
Take care. Always!
