Crypto Universe
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Crypto Universe

Is your token going to the moon?

This simple trick will save you lots of time and money when looking for crypto gems

It will only take you seconds and help you separate true gems from cash-grabbing scams.

Photo by NASA on Unsplash

Crypto is more popular than ever, both for developers and investors. With more than 13,000 cryptocurrencies and tokens listed on CoinMarketCap, it has become complicated to distinguish legit projects with long-term potential from plain cash-grabs and Ponzi schemes.

People are losing their minds trying to find the next 10,000x pump that will make them life-changing money by investing only $100. They panic-buy the top of the first token they see pumping, which is an infallible strategy to lose your money in just a few days. Sometimes, even hours.

Luckily, there’s a very easy and straightforward way of knowing how far a small market cap token can go. So if you’re looking for moonshots, make sure you take this into account.

It’s all in the tokenomics

The first thing you need to do before you even consider putting your money anywhere is the token economics of the project you’re looking at.

Unlimited supply is the first red flag. Coins with no hard cap limit are often highly inflationary. That means increasing supply and decreasing demand, which translates into a progressive and persistent fall in price.

Unlimited supply is precisely why fiat money keeps devaluating year after year. Why would you buy a token that does the same?

Now, some coins like CAKE have unlimited supply, but also burning mechanisms that remove tokens from circulation. This is an attempt to control or even stop inflation.

In those particular cases, you should consider how much of the circulating supply is burnt compared to how much is issued and draw your own conclusions.

Scarcity is a critical factor when it comes to appreciation. The harder a token is to acquire, the more valuable it will be, so make sure you stay away from hyperinflationary coins.

Photo by Giorgio Trovato on Unsplash

Look at the market cap

Let’s play a game. I challenge you to leave a comment and a clap when you finish reading this article if you heard any of these statements.

ADA will be the new ETH. It’s going to $100!

Elon will pump DOGE to 3$. To the moon!

If you missed the DOGE train, make sure to jump on SHIB. We’re going to $1.

No, no, no.

That right there is FOMO speaking. Did you notice how every successful trader tells you to suppress your feelings and act only on your mind? Those three statements right there are from people who do precisely the opposite.

Photo by Sasun Bughdaryan on Unsplash

Those predictions will never happen, at least not in the short term. And you can tell by looking at just one metric: the market cap.

By the time I’m writing this article, the numbers say that:

  • ADA is worth $2.17, its market cap is $72.2B, making it the #4 coin.
  • DOGE is $0.26, its market cap is $35.3B, #9 coin.
  • SHIB is $0.000048, its market cap is $18.7B, #11 coin.

Now, let’s assume those predictions come true. Then we will be looking at something like this:

  • ADA: $100, $3.325B or $3.3T market cap.
  • DOGE: $3, $395B or $0.3T market cap.
  • SHIB: $1, $394,796B or (check this out) $394T market cap.

What does this mean? Let’s put things into perspective.

During its most significant bullish run in history, BTC is now worth $62K. Its market cap just crossed the $1T threshold, marking a historic milestone.

Top coins by market cap.

One. Trillion. Dollars. This is BTC we are talking about. The most popular, relevant, and valuable cryptocurrency there is, and it took it this long to reach $1.1T market cap.

Do you see why these price predictions are completely irrational now? If ADA were to reach $100, it would be worth three times what Bitcoin is now. DOGE at $3 would make it the #3 coin, only $100B behind ETH. And SHIB, well, it isn’t even worth explaining it. Let’s just say it would be worth 150x what the entire cryptocurrency market cap is worth now.

It only takes a glance

Calculating a token’s potential market cap is as easy as multiplying the price by the total circulating supply. It takes about 10 seconds and will help you estimate the true probability of any coin reaching a specific price.

You can look at the market cap backward and see it as the amount of capital a coin needs to absorb to reach a price. Using the examples above, ADA will require a $3.3T investment to hit $100.

Do you see that amount of capital flowing into ADA in the next five years? How about ten? No? Then you know it’s just not going to happen.

Photo by SpaceX on Unsplash

Remember this trick every time someone is trying to shill you their bags, make you give in to FOMO, or tempt you with crazy price predictions.

Just multiply the price they say their coin will reach by the circulating supply and compare the result to the market cap of the top 10 coins.

If it’s unreasonably high, it will probably never happen in your lifetime. Maybe 200 years from now, who knows?

Anyway, I hope this article helps you stay in control and don’t FOMO in any small-cap coins like most crypto newbies out there. If by reading this article, you saved as much as $100, it was worth writing it.

Did you like this story?

I’m glad you did! My name is Santi. I’m a marketing professional and independent writer. I enjoy and write about video games, cryptocurrency, and pop culture. If you’d like to read more content like this, consider following me on Medium and Twitter. I’d really appreciate it!

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