When I first started trading altcoins, I was doing so blindly. With no real grasp of what determined a coins value or even a working knowledge of how to correctly execute a limit order, I floundered around and threw money away on transaction fees and by bidding on coins that had clearly reached their plateaus. After I made a few bad decisions too many I decided enough was enough and I was going to learn precisely what I was looking at when coingecko or coinmarketcap popped up with what should have been answers to my questions. I'd now like to explain some of the most basic crypto statistics and attempt to explain how they relate to the market.
To begin, the first thing I like to learn about a particular currency is the total coin supply. This number will tell you how many total coins will be made available of a certain currency. Using this number, I can get a basic grasp of what price range a currency will be able to carry. If the coin has a high number of total coins that will be supplied, chances are it will keep a lower price. For instance, Chainlink (LINK), is a substantial coin that is trading around $23 currently. Chainlink carries a total supply of over 400 million coins. This is almost 20 times the amount of Bitcoin that will come into existence with 21 million. Now Tron (TRX) has a far greater total supply of 500 Billion coins. It is because of this and because of Tron's lightweight design that the coin has been trading between $.025 and $.035 for nearly a year now. Trons aim was to carry quick, inexpensive transactions and the coin delivers every time in those two regards.
Now that I have a viewpoint of what the circulating supply of the coin could be several years down the road, I want to see how many of those total coins are actually in circulation currently. If half of the currency has been released over the course of 2 years and only 10% of what has been released is in circulation, I understand that the.coin is not in very high demand. Likewise, if I see that coin X has a total supply of 100 million coins, with 80 million having been released, and I also see that 75 million of these released coins are circulating, I have a winner on my hands. This is clearly a coin that is moving, and probably has a decent market cap.
Of course it is said that the coins market cap shows the overall value of the coin. It is.easy to determine a coins market cap and its potential market cap (at current price). To determine a coins' market cap, you will take the circulating supply of coin and multiply that by the price of that coin. For instance, coin X has a circulating supply of 100,000 coins and is currently trading at $.765 the current market cap for coin x is 100,000 × .765 = $76,500. To determine the overall Market cap of a currency, simply multiply price by total supply rather than circulating supply.
..A coin's liquidity refers to the tendency of that coin to be bought and sold amongst a market. If a coin has a low 24 hour volume in a certain market, you would say that coin has a low liquidity. For instance, for hypothetical reasons, let's say you were analyzing the coins Liber Token, and Eureka on Probit exchange, and you realized that both of these coins were done falling and that either of them could surge in price at any moment. This is the bubble that altcoin traders live for. Once you ride that high and cash out before that coin has a chance to dip back down, you'll be addicted for life. But I digress. You realize that Liber token has a 24 hour volume of $30000 and Eureka, which trades against Tether as well, only has a volume of $1100, that shows you that if you decided to go with Eureka, your coins may not be bought when the price goes up. Especially if Eureka is trading on another market. And if that other market does alot more volume of the same coin, you might be stuck with that coin with no way to move it until the price drops significantly. This is why the liquidity of a coin on a certain market is one of the most important concepts of a coin that the trader can grasp. The more you trade the easier it will be to spot coins that are going to be hard to move once you get a hold of them. But there are always exceptions. A coin can have a lot higher liquidity when it debutes on an exchange sometimes. Often times time will not have a clear idea of how well a coin will move until after that initial surge dies down.
That brings me to the last statistic I want to discuss today. The "volatility" of a coin refers to how the price of a currency tends to fluctuate. If a coin has a tendency to go from big gains to having substantial losses in a small amount of time, this coin is very volatile. Although these coins can be dangerous, the altcoin trader doesnt really shy away from them. Instead you must learn to use these coins as tools in your tool belt. If you can successfully realize patterns that the coin goes through, rising and falling, rising, and falling again, you can use these coins to make a real quick buck. And although this may work for you several times, you might not.want to push your luck to much at this type of investing, because eventually many of currencies hit a spot where the rise that has happened after so many falls before, doesn't show up. I hope that this possibly shined a little light on a few aspects of the crypto currency world that you may have been confused about.
And head up, I always use either"
Good luck! And Happy Trading!