At the time of launch, the value of Bitcoin (BTC) was $47,247, while the value of Dogecoin (DOGE) was approximately $0.068. If you are not familiar with encryption technology or the market, then the first thing you might think of is, hey, DOGE is cheaper than Bitcoin, and if it takes enough effort, it has the potential to catch up to BTC and exceed $20,000. However, this way of thinking is illogical. why? Market value and wealth supply.

Market value is the total monetary value of the outstanding supply of assets. As the value of a particular asset rises or falls, it changes. Sites that support encryption (such as CoinMarketCap) will rank each cryptocurrency by its market value. Bitcoin has been the leader in this category for a long time, with a market capitalization of approximately $879 billion at the time of publication.

The market value takes into account the outstanding supply of each asset. The supply in circulation is the amount of freely flowing assets in the market. Multiply the supply in circulation by the price of the asset, and you will get its market value.

The transaction price of assets with higher liquidity is usually lower than the dollar value of each coin or token. Currently, the circulating supply of BTC is relatively small, about 18.6 million coins. Although it is slowly increasing due to mining, the maximum supply is still relatively low, at 21 million coins. According to data from CoinMarketCap, Dogecoin’s current circulation is approximately US$128.3 billion.

Taking into account the excellent supply of DOGE, if each token is priced at around US$6.23, its market value will reach around US$800 billion. At the same time, due to its small circulation and close to the same market value, the value of Bitcoin exceeds $40,000 per coin.

In order for the cost of each DOGE to be as high as $1,500, the market value of the asset must be approximately $192.4 trillion. At the time of writing, the market value of the entire crypto market is approximately $1.46 trillion.

Generally, the unit price of assets with low liquidity will be higher than that of assets with high liquidity. For example, Year.finance’s YFI has a very small issuance of only 36,635. YFI has risen from around US$900 in July 2020 to US$40,000 in September 2020. Various other factors are also pushing prices up. However, if an asset has a relatively large liquidity, the price of each of its tokens cannot be directly compared with the price of tokens with lower bids.

Usually, crypto assets also contain the highest bid programmed in their code. Through various forms of blockchain network verification (ie H.Mining or Stake), the available supply of each asset continues to increase until the maximum supply is reached. Prices may be diluted as coins or tokens flow into an appropriate circulating supply, as validators will sell their rewards to help the network pay for business expenses.

What is the difference between total supply and maximum supply? “Total supply refers to the number of coins or tokens currently available in circulation or blocked in some way,” Henrique Erhardt wrote in an article in Binance Academy, adding: “This is the sum of coins, Mined (or spent) minus the number of coins that have been burned or destroyed.”

Prior to this, the maximum supply was the total supply of assets, or more precisely the total amount of coins or tokens that existed or could be created. This means that once the maximum supply is reached, it is no longer possible to produce coins or tokens.

It is important to understand the concept of market value related to the price of a particular asset so that you can evaluate the cryptocurrency space more realistically. You can look at the price of a single Bitcoin and think it is too expensive, allowing you to immediately focus on cheaper products.

Source: CoinTelegraph

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