Dogecoin has become the latest cryptocurrency to seize a $1 billion market cap as commentators suggest the metric is now of little use.
What’s in a Market Cap?
As altcoin markets surge this week, new all-time highs are in sight for many Top 50 assets. 35 altcoins, in addition to Bitcoin, can now be found in the top echelon – those with a market cap of $1 billion.
Along with fellow newcomer Komodo, Dogecoin has exploded in value over the past few months relative to its previous price activity. Now changing hands at just under $0.01 per coin, DOGE had spent most of its existence fluctuating only slightly around $0.0002.
Despite a lack of conspicuous technical advances or new use cases, investors have made huge gains, fuelling speculation that an altcoin’s multi-million or multi-billion dollar market cap says increasingly little about its true ‘value.’
According to @CoinMarketCap we have 36 #cryptoassets now worth > $1B in network value, and @dogecoin is the 36th. pic.twitter.com/6nvxrwMj2b
— Chris Burniske (@cburniske) January 3, 2018
Altcoins and ‘Funny Business’
Cryptocurrency journalist and commentator Kyle Torpey wrote in Forbes this week:
Long story short: There is a lot of funny business that can go on with cryptocurrency market cap calculations. This is not to say that the market cap metric should be thrown out entirely, just that it needs to be combined with other data points.
Torpey noted the market cap figures on ratings websites are often overly optimistic, not taking into account the proportion of a coin’s supply that is locked up and out of circulation.
He went on to add:
The easiest way to see there’s something fishy going on with a particular coin’s market cap is by looking at the trading volume on exchanges. A lack of liquidity on exchanges means a whale could come in with a large amount of coin and crash the market at a moment’s notice.
Bitcoin’s overall market cap share, meanwhile, has continued falling to new record lows Wednesday, dropping below 36% and approaching half the share of the pie it held just weeks ago.
What do you think about judging cryptocurrencies by market cap? Let us know in the comments below!
Images courtesy of Twitter/@cburniske, Pixabay, and Bitcoinist archives.