Learn what market capitalization and ICO really are in this video.
Transcript Below:
Hi there!
My name is Dani and I’m the founder of the simplest crypto dictionary beginner’s guide.
In this video series, I’m going to introduce the basic concepts surrounding cryptocurrency. We’re going to touch on:
– 13 very important and very common words you need to know
– Then I’m going to bring up 5 common categories of cryptocurrency
– And finally, the 8 crypto resources you need to be using right now
Before I go on, here’s a quick disclaimer: Nothing published by me or Decryptionary constitutes investment advice. Always do your own research before making an investment.
ICO is short for Initial Coin Offering, it’s the limited-time process by which new cryptocurrencies make their coins publicly known and begin selling them directly to people. People invest their money in these coins in the hopes that they will later be worth many times more than what was paid. For example, Ethereum sold their coins in their 2014 ICO for $0.40 and in 2017 the coins were worth over $400 each.
Market Cap is short for market capitalization. It is the total dollar value calculated by taking the total supply and multiplying it by the price. For example, if bitcoin is worth $10,000 and there are 16,500,000 coins in existence, that means its market cap is $165,000,000,000 or $165 trillion.
Many people like to use market cap as a way to rank and judge the size of a cryptocurrency. The flaw in that is that the price moves around so rapidly due to people with large wallets purchasing or selling large amounts of crypto.
The changes in price are magnified when fewer people are buying or selling. Imagine the price as two wedges pitted against each other, one side made up of buyers and the other side made up of sellers. There is a range of sellers at $1 all the way up to $10 and the same holds true for buyers.
If one guy comes in with a stack of cash and decides to put it all in, he will purchase everything that was priced 1-5 dollars. Suddenly the average price has gone up from $1 to $5 in a 5X increase. If the total supply was 1 million coins, the market cap has gone from 1 million to 5 million.