Already more than 3 months in the cryptocurrency market there has been a rapid decline, which is fixed by various factors. One of the key is the market capitalization, which is formed on the basis of the current price of cryptocurrency. Many cryptanalysts claim that estimating a cryptoactive asset by market capitalization is not the best option. Below we analyze why.
Manipulating market capitalization by the whales
Most cryptanalysts claim that large holders of digital assets can quite easily manipulate market capitalization quotes on such reputable resources as Coinmarketcap . This was made possible thanks to not strict rules on certain cryptocurrency exchanges and low liquidity of individual coins. It was perfectly traced last year, when crypt market was overtaken by the ICO boom.
Moreover, on the aforementioned Coinmarketcap, indicators from Asian markets, including South Korea, have ceased to be taken into account since a certain point. Taking into account the fact that prices there are usually higher, and for a full picture, data from all markets should be taken into account, the value of coins displayed on the resource is not quite correct. This was stated by Anatoly Radchenko, co-founder of Crypto Traders .
Evaluation of cryptocurrency assets in dollars
The most popular currency in which cryptocurrency is valued is the dollar. There is a definite problem in this approach: market capitalization is the product of the value of the token and their total number . She assesses the supposed success of the crypto project from the point of view of the expected income in foreign currency. In the area where we are constantly working on inventing new nonfinancial payment forms, relying on fiat money is not quite right.
The priority in making profits in dollar terms has provoked the growth of the community of enthusiasts whose goal is to get the maximum benefit, which depends on the high rate of cryptocurrency. A large number ofpseudo experts appeared on Youtube, Twitter, Telegram, who earn huge money on gullible readers. At the same time, their actions do not benefit the cryptorium market and do not have a significant impact on it. As another confirmation of the race for Fiat, we can note the moment when a huge number of ICOs appeared on the crypto market, collecting contributions in dollars, in exchange for worthless garbage tokens .
Attracting new investment affects the entire community.
The value of tokens and their further fate directly depend on the team behind each specific project. Professionals unite, study areas of interest and implement fundamentally new products. Cryptoenthusiasts are driven not only by the desire to get more cryptocurrency and make a profit, the development of technology in general is important for them . Naturally, not every project on the blockchain offers something innovative: it lacks both raw products and fraudsters altogether . But despite this, more popular projects are the basis of serious technological ideas for decentralization of the economy . Similar technology value should also be considered.
The crypto community has become more calm and reasonable. Many market participants are already quite easy to weed out most scam projects and highlight the really promising. An important factor in assessing thetoken is the composition and professionalism of the team . Although, in the end, the cost will be based precisely on the value in the dollar .
How to evaluate a cryptoactive ?
Very often, the assessment of the token is based on the basic principles of classical economics and uses the variables from the formulas to get the value in fiat equivalent. For this reason, the result is not entirely accurate, because the uniqueness of the system of crypto-assets is not taken into account .
Analysts popular publication Coindesk an alternative option for estimating cryptocurrency they recommend the use of Bitcoin . Such an approach may reduce the importance of price as one of the components in assessing the real value.
In addition to the price, it was proposed, equally, to consider four more indicators:
- trading volume on the exchange ;
- developer activity ;
- size and actions of the community project in social networks ;
- number of transactions on the blockchain .
After evaluating all these factors, the coin acquires a certain image and the idea of what kind of token it is and what surrounds it. For example, consider the anonymous cryptocurrency Zcash: it attracted the attention of many cryptographers who are interested in data protection , but at the same time activity in social networks and the number of transactions leaves much to be desired . Comparing the project with Ripple , you can see that the second one has a huge amount of activity on social networks and even has its own “XRP army” , which defends the interests of the project in the Internet space. Developers directly interact with market participants. and potential investors, which has a positive effect on the work of the entire project.
Evaluation of tokens in bitcoins instead of dollars
Offer analysts Coindesk evaluate altkoiny in Bitcoins instead of fiatcriticized. According to the opponents, in this case, the prejudices of Bitcoin maximalists are supported , who believe only in the first cryptocurrency .
Analysts presented their version of the assessment , but there are also questions about it. For example: if some Altcoin surpasses Bitcoin by any of the indicators, you will need to evaluate the already higher currency for the one that was lower . But still this option has great chances for development. Do not forget that in fact there is something similar in the global economy . Provided a quote of currencies of different countries, the value of which is displayed in relation to the US dollar. Absolutely normal here is a situation where some currencies, such as the British pound or the Swiss euro are worth more than the dollar itself.
At the moment, according to selected criteria, Bitcoin is the most popular and inspires confidence of market participants. It is possible that in the case of the dominance of another coin, it will also be used to evaluate all other altcoins .
Now this version of the evaluation of cryptocurrency is more experimental, but most likely it will be taken as a solid foundation. It is very important that institutional investors, going into cryptographic markets, take into account this approach and not focus exclusively on market capitalization.