Don’t look at cheap coins – look at market cap

Cheap coins with huge circulating supplies are a magnet for amateur investors. They often believe that a low price implies that they’re getting in early. But this simply isn’t the case.

When evaluating crypto investments, it’s important that investors look at market cap, not price. When people make investment decisions based on what’s cheap, they tend to end up with low-quality assets. Moreover, investors need to look at the fully diluted market cap, which takes into account coins that have been created but not yet released into the market.

Similar to stock investment, same applies crypto. Every public company has a particular number of shares circulating. When you select stocks to buy, you can ignore the price. Look at market cap, growth, price/earnings, cash flow and other real fundamentals.

There is also the myth lower-priced investments have the potential to generate higher percentage returns. This is false. If a stock’s earnings go up 10 times, it doesn’t matter if shares start at $1 or $100. The return on investment will be the same in the long run.

Sven Franssen