Understanding Market Cap
While I love Gene Simmons as a business man and musician, his understanding of Crypto when he made this statement is incomplete.
Price is what you pay per coin but it does not mean all coin prices work the same way. Instead of looking at price, you should look at Marketcap. Why?
Let's use Cardano (ADA) as the example.
On Mar 11, 2022 ADA was trading for $1.01 (its basically a USD stable coin lately) and has a market-cap of $32,367,882,181.
Bitcoin is trading for $49,519.69 with a market-cap of $939,909,638,115; that means Bitcoins market-cap is 29x bigger than ADA.
For ADA to have the same market cap of Bitcoin ( $32,367,882,181. ), its price would become $29 , FAR from the $49,519 Bitcoin was at that market-cap.
This is because your initial price per coin at listing can and usually is different than every other coin.
If Gene Simmons was correct about how price worked, then if ADA was ever priced at $49,519.69 like Bitcoin, then it’s market-cap would have to grow by the following percent: 1586977714415489% (one quadrillion five hundred eighty-six trillion nine hundred seventy-seven billion seven hundred fourteen million four hundred fifteen thousand four hundred eighty-nine) , that’s 1688x Bitcoin’s current market-cap, I wish it luck, but hey who knows?
Another reason price doesn't matter is because Bitcoin sells in fractions called “Satoshis”. A satoshi is the smallest denomination of Bitcoin, equivalent to 100 millionth of a Bitcoin. Bitcoins can be split into smaller units to facilitate smaller transactions. This means you can use any amount of money you want to buy it, $10 is just fine. And you could think of market-cap as its price as a better way to evaluate price of Cryptocurrencies.
When Market caps get higher, it takes more money (capital) to move the price up which slows down the ease of growth. When a super low market-cap alt coin that was a $20,000 market-cap is now a billion dollar market-cap after 3 months, it’s probably time to take your money and run because that thing is due for a MAJOR correction. As market-caps get higher, it takes more and more dollars to increase the price, and the guys who got in early are wanting to take profits.
How Market-cap is calculated
By multiplying the total number of coins available to buy in the market (circulating supply) by the price of a single coin. So Bitcoin on this day has a circulating supply of 18,985,356 and a price of $40,904.51. So multiply the two and you get a market-cap of $776,586,646,385.
What is total supply vs circulating supply?
1. Circulating supply is the amount of coins or tokens available to purchase from exchanges (Binance, Coinbase, Uniswap, etc).
2. Total supply is how many coins can ever be in existence (once all fully mined) .
Price does matter to an extent when you are looking at an individual asset. Buying Bitcoin at $20,000 is better than buying it at $80,000, but it doesn't matter if another coin's price is $1. The correlation between different coins prices aren't important for determining their future potential. So while Gene Simmons is right that Cardona could have higher returns over time than Bitcoin, it isn't because of it's price. It's because it is a good project with a smaller market cap, and it takes less money to move a smaller market cap's price either up or down.
Price is what you pay per coin but it does not mean all coin prices work the same way. Instead of looking at price, you should look at Marketcap. Why?
Let's use Cardano (ADA) as the example.
On Mar 11, 2022 ADA was trading for $1.01 (its basically a USD stable coin lately) and has a market-cap of $32,367,882,181.
Bitcoin is trading for $49,519.69 with a market-cap of $939,909,638,115; that means Bitcoins market-cap is 29x bigger than ADA.
For ADA to have the same market cap of Bitcoin ( $32,367,882,181. ), its price would become $29 , FAR from the $49,519 Bitcoin was at that market-cap.
This is because your initial price per coin at listing can and usually is different than every other coin.
If Gene Simmons was correct about how price worked, then if ADA was ever priced at $49,519.69 like Bitcoin, then it’s market-cap would have to grow by the following percent: 1586977714415489% (one quadrillion five hundred eighty-six trillion nine hundred seventy-seven billion seven hundred fourteen million four hundred fifteen thousand four hundred eighty-nine) , that’s 1688x Bitcoin’s current market-cap, I wish it luck, but hey who knows?
Another reason price doesn't matter is because Bitcoin sells in fractions called “Satoshis”. A satoshi is the smallest denomination of Bitcoin, equivalent to 100 millionth of a Bitcoin. Bitcoins can be split into smaller units to facilitate smaller transactions. This means you can use any amount of money you want to buy it, $10 is just fine. And you could think of market-cap as its price as a better way to evaluate price of Cryptocurrencies.
When Market caps get higher, it takes more money (capital) to move the price up which slows down the ease of growth. When a super low market-cap alt coin that was a $20,000 market-cap is now a billion dollar market-cap after 3 months, it’s probably time to take your money and run because that thing is due for a MAJOR correction. As market-caps get higher, it takes more and more dollars to increase the price, and the guys who got in early are wanting to take profits.
How Market-cap is calculated
By multiplying the total number of coins available to buy in the market (circulating supply) by the price of a single coin. So Bitcoin on this day has a circulating supply of 18,985,356 and a price of $40,904.51. So multiply the two and you get a market-cap of $776,586,646,385.
What is total supply vs circulating supply?
1. Circulating supply is the amount of coins or tokens available to purchase from exchanges (Binance, Coinbase, Uniswap, etc).
2. Total supply is how many coins can ever be in existence (once all fully mined) .
Price does matter to an extent when you are looking at an individual asset. Buying Bitcoin at $20,000 is better than buying it at $80,000, but it doesn't matter if another coin's price is $1. The correlation between different coins prices aren't important for determining their future potential. So while Gene Simmons is right that Cardona could have higher returns over time than Bitcoin, it isn't because of it's price. It's because it is a good project with a smaller market cap, and it takes less money to move a smaller market cap's price either up or down.