In this video I talk about market capitalization and what it means for SPS.
We learn how to calculate market capitalization, and the key pieces of information regarding it. This allows us to find out the total value of a token, and also the potential profit when entering positions.
As well, we go through some simple examples that show the difference between price and market cap, and how the valuations affect these prices. Just because a token price is more expensive, doesn’t mean it’s worth more when you dive further into the numbers.
We can categorize cryptocurrencies into three main categories which help quickly define their value.
Large Cap - 10 billion dollars or more
Mid Cap - 1-10 billion dollars
Small Cap - Less than 1 billion dollars.
It’s also important to understand how the supply affects the value of a crypto currency, so knowing the different between circulating supply and max total supply is equally important. This will obviously affect the value of SPS or any cryptocurrency in the long term.
So what happens when supply increases in a token? To put simply the value will accordingly decrease. However, to find out the exact differences, we use a handy tool to calculate market capitalizations on the fly.
There are popular mechanism and strategies used to increase the value of tokens that are diluted by supply, and that is called burning.
The goal of token burning is to remove a certain quantity of tokens from the circulating supply which in turn increases the value.
Tokens that are burned, are transferred into a frozen private address called a Burn address. It’s essentially a one-way address with no ability to reverse the transaction or withdraw the coins.
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