Looking at crypto prices, the top 10 in the DCX10 crypto index for example, there are major variations. A single Bitcoin costs almost $8800 but an XRP token costs about $ 0.27. This week we delve into the monetary character of Crypto. Why do their prices differ so much? What makes up market cap? What does it mean for DCX10?
Market capitalisation is one of the tools to measure the value of a security. It usually consists of multiplying the amount of outstanding shares by the current share price. In Crypto, it’s defined as the circulating supply of tokens multiplied by the current price. If a coin has 1000 coins in circulation and is trading at $1 a coin, it would therefore have a market cap of $1000.
There are around 18 million bitcoins mined, and the price is around $8800 at the time of writing. Bitcoin’s market cap, therefore, is roughly $160 billion.
Most cryptocurrencies limit the supply of their tokens. In Bitcoin, the inflation rate decreases every four years in what is known as the Bitcoin halving. All cryptocurrencies control the supply of the token by a schedule written in the code. This means the “money supply” of a cryptocurrency can be calculated with accuracy. Many crypto currencies have a capped supply, while some don't. Take Bitcoin for example: there will finally only be 21 million in existence. Whereas XRP has a capped supply of 100 Billion. As there are significantly more XRP available, logic dictates, all else being equal, that XRP would have a “smaller” price.
It's crucial to understand that just because a token has a “smaller” price, it does not make it cheaper. Size of price does not guarantee value of project. Litecoin has a price of roughly $60 but XRP with its $0.27 has a market cap 3 times larger.
Circulating supply is the number of crypto tokens available to purchase. (Tokens that have been mined or released.)
Maximum supply is the number of tokens that will ever be available, written in its code.
What does this mean for DCX10?
DCX10 includes crypto into the token based on these market cap weightings. It is a market cap weighted index token.
Bitcoin is still the largest contributor, with roughly 75% of the total Crypto market cap, it remains by and large the most valuable coin, roughly 7 times as valuable as Ethereum. It therefore also makes up the majority of the DCX10 token. Check out what the weightings of all 10 assets in DCX10 here.
Read: the ABCs of XRP
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