When looking at all the bitcoin alternatives, you’ll no doubt see that they are much “cheaper.”
You’ll also no doubt think that they could also rise to the same price as Bitcoin, and you’d become a multi-billionaire with just $100 worth because you’d have so many of them.
Sadly, that not likely to happen.
Here’s why; Bitcoin has a 21 million coin limit, whereas many altcoins (Bitcoin alternatives) could have a limit set in the billions – or even no limit at all (they’ll just create more later).
Why does this matter?
Because the price of the coin is simply it’s Market Capitalisation (total amount of money invested/held in the crypto currency) divided by the number of coins in circulation (plus some difference among the exchanges and international currencies).
For example (heavily rounded for ease of calculation) :
|Coin||Market Cap||Coins in Circulation||Price|
|Bitcoin||$300 Billion||14 Million||$21,000|
|Bytecoin||$2 Billion||180 Billion||$0.01|
So could Bytecoin ever be the same price at Bitcoin?
Bitcoin’s price is 2,100,000 times higher than Bytecoin’s. If Bytecoin had the same market cap as Bitcoin of $300 Billion in this example (150x higher than $2Billion), its price would be $1.50, not $21,000. To be $21,000 – Bytecoin’s Market Cap would have to be 2,100,000 times higher than $2 Billion – that’s $4,200,000,000,000,000 ($4.2 Quadrillion) – which is like having practically all the money that exists in the world held up in one crypto coin. So the answer is very much no.
Could Bytecoin ever have the same Market Cap as Bitcoin?
That is more possible than reaching the same coin price as Bitcoin. If its Market Cap did get that high, buying it at the point its market cap is in the example would have a 150x return ($2 billion x 150 = $300 billion, or $0.01 x 150 = $1.50 per coin).
It doesn’t matter if you invest $100 and get 10,000 coins priced at $0.01 – or spend $100 and get 0.01 coin priced at $10,000. If either one increases by 20% you’d make 20% (or likewise lose if it goes down by the same percent). The actual coin price / number of coins you have is irrelevant, only the percentage increase (or decrease) matters to your money.
So what you should be looking at when considering if you’ll make the highest return on your money, is the coin’s market cap and where you think it could realistically be in the future.
Bear in mind of course there are no guarantees, that any coin could crash completely even if it looks totally unlikely. So if you do invest, only invest what you can afford to lose.
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