Many people make mistakes when evaluating the price of a cryptocurrency. The basic mistake is that they do not consider the inflation of the token (supply emissions). When a user invests money in a token through "buy the dip", the mistake they make is seeing the ATH (All Time High) of that cryptocurrency (which occurred 3 or 5 years ago). This is a serious mistake. If you do not want to lose your money by making wrong expectations, you should forget about the price and start thinking about the market cap. I will give an example of the reasons why comparing the price, after years, is wrong. Hypothesizes to invest 1000 $ in a crypto that today has a price of $2. All Time High is $ 10. You may believe you have a 5x gain, if the price returns to the maximum (10$/2$ = 5x). By investing $1000 you could do $5000. In reality, reasoning is so wrong. Not only because it is not said that the past repeats itself but also because the old capital may not be enough to bring the price back there. The first thing you should consider is that the market cap is given by the product of the "price" and the "circulating supply":
Circulating supply is different from total supply. Supply generally increases over time (token unlocks, staking rewards, various incentives). Supply can decrease if a token is deflationary (burn) or if the team does a "buyback and burn" of supply. The price, with the same demand, decreases as the supply (inflation) increases. The classic example I want to give you is $FIL (Filecoin). If you check the ATH of $FIL you will notice that it is $236 (2021). Today's price (2024) of $FIL is about $3.50.
You might think that you have a 67x gain, investing your funds in $FIL ($236/$3.50=67) IF it returns to ATH. In reality, if you evaluate and compare the market cap, you will realize that the same capital (incoming buys) would no longer be able to bring the price to $236.
ATH of market cap of $FIL is about 12.1B (2021). Today the market cap of Filecoin is 2.1B (2024). Well, you have a margin of gain of about 5X (12.1B/2.1B=5.76X).
What does this mean? If the SAME CAPITALS as in 2021 enter $FIL, the price will reach about $21 (3.50$*5.76=20$). The old ATH of $236 can no longer be reached. To reach the old ATH ($236), a market cap of 121B would be needed!
Why did this happen? $FIL has been continuously emitting supply, diluting the price. This is one of the reasons why altcoins are terrible long-term investments. Altcoins are good speculative assets to make short term gains or accumulate to resell in case of strong speculative bubbles (bull market). However never hold them in the bear market. Your wallet will empty! Altcoins should be used to accumulate stablecoins...to pour into $BTC or $ETH (if you want something more speculative).
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