When people assess the cryptocurrency and altcoin markets, one area that tends to be ignored is supply structure. Supply structure can tell a lot about about potential opportunities in the market long term.
Importance Of Cryptocurrency Supply
Supply is very important because it helps define overall economics in the markets. The two terms that emerge in this scenario are “supply and demand.” In traditional economics, when you have a smaller supply + demand, it creates a lucrative opportunity. On the flip side, if you have large supply + demand, it creates opportunity, but that opportunity has a harder time monetizing.
This is why Bitcoin has historically been one of the best performing asset classes anybody has seen.
Bitcoin has a really low “Free Float.” Simply defined, free float is the best estimation of available coins/tokens that circulate in the market for the general public. For example, Bitcoins free float sits at 18,195,134.
Further Assessing Cryptocurrency Supply
For the average investor / trader, they may think that the figure above is large since its surpassing 18 million. In reality, having a supply structure of only 18 million is very small. If you were to go on your stock accounts such as TD Ameritrade, or E-Trade and look up one of your favorite stocks, chances are it would have a “shares outstanding” figure that’s much much larger. Simply put, the lower the supply of an asset, the easier it is for that asset to move in price pending demand. This is the very reason so many early investors in Bitcoin got wealthy over time. Bitcoin demand was very low in the early days, but we saw that pick up drastically as time progressed. With demand skyrocketing + a low “free float” asset like Bitcoin, you saw the price nearly hit $20,000.
Cryptocurrency List & Their Free Float
- Bitcoin: 18,195,134
- Ethereum: 109,528,732
- XRP: 43,685,558,183
- Litecoin: 63,989,335
- EOS: 950,524,094
- TRON: 66,748,167,686
Assessing Supply of Large Cryptocurrencies
In the text above, we take a look at a list of cryptocurrency by market cap. Brave NewCoin categorizes a cryptocurrency list by their free float supply. As you can see, Bitcoin by far has the lowest free float supply structure. If you were to apply a scenario where the same amount of demand poured in for the list of cryptocurrency above, Bitcoin by default would benefit the most in price action by applying traditional economics of supply and demand + a much smaller offering available for that opportunity ( supply ).
Examples In The Market
Let’s take TRON for example. If you take a look at TRON above, you will see that it’s free float is in excess of 66B. Arguably, TRON has had some great developments the last couple years, but many investors ask the question of “why the heck isn’t price moving?” This all funnels down to supply / demand. Yes demand may be ramping up, but it becomes very difficult to scale when the large supply structure exists. The same thing happens in the stock market. Many investors become intrigued in penny stock because the price is so low. What they forget to assess is supply structure. Many of these penny stocks have supply in the billions as well, and that’s why you see many penny stocks stuck at such a low price forever.
Opportunity May Still Exist
Despite many cryptocurrencies having a large supply structure, a select few will win in the long-term. It all comes down to assessing the market and the problem they strive to penetrate on a global scale. In the traditional markets, many power players have supply in excess of 4 Billion. If you take a look at Apple stock for example, you will find that it’s supply is 4+ billion. But on the flip side, we all know by now, Apple is a global leader and provides value on multiple layers. In this scenario, even a large supply structure becomes irrelevant because you have that global presence of capital inflow.
When assessing a list of cryptocurrency, XRP becomes a popular topic. Many have criticized XRP due to its supply structure. From the metrics above, you will also see that XRP free float is in excess of 43B. This is another scenario where many investors scratch their head during price action. XRP is being adopted by banks on a global scale for their “ODL solutions”, cracking deals with some of the largest money transmitters in the world – yet price has remained pretty stagnant for a while. Again, this relates to researching the market and really assessing what the project plans to accomplish on a global scale. Ripple is ultimately positioning XRP to move money on a global scale and alleviate current cross-border issues that exist in the payments sector. This is why many investors apply a lower premium on its supply structure. Many believe XRP will be adopted on a global scale, and therefore monetize on its very large free float long-term.
This is also why so many researchers in the crypto space believe a high amount of altcoins will fail in the long-term. It can be justified just by looking at supply and demand. If an altcoin is not being adopted on a global scale, it can essentially be outsourced by Bitcoin. If that global presence doesn’t exist, it becomes very hard to scale mathematically. Yes the altcoin could potentially hang around for a while, but many will be stuck staring at stagnant price for years on end.
Cryptocurrencies That Offer Low Free Float
As the cryptocurrency industry continues to age, it will be crucial to apply different research tactics. Bitcoin continues to gain traction on a global scale, and it will make it more difficult on altcoins as time progresses. After assessing a certain sector that interest you ( payments, Infrastructure, DAAPS, entertainment etc. ) you can then focus on supply structure. If you find the right altcoin that creates utility long-term, there’s still massive opportunity to capture capital appreciation. Below we will focus on the top 100 cryptocurrencies by market cap. We then filter out some of the ones with the lowest “free float.” Data below is verified by scanning data provided by CoinMarketCap .
- Maker: 988,355 ( smart contact platform on ETH chain that stabilizes the value of DAI )
- DigixDAO: 2,000,000 ( specializes in tokenization of physical assets )
- Horizen: 8,331,438 ( secure transactions and communication )
- Zcash: 8,795,569 ( focusing on transactions in a transparent matter )
- DASH: 9,304,910 (digital cash that focuses on fast, easy, and secure payments globally)
- Zcoin: 9,381,043 ( privacy focused cryptocurrency )
- Decred: 10,786,831 ( Bitcoin fork focusing on on-chain governance and consensus )
- Augur: 11,000,000 ( prediction markets )
- Quant: 12,072,738 ( connect the world on multiple blockchains )
- MCO: 15,793,831 ( alternatives to traditional financial services )
- Monero: 17,426,141 ( private and untraceable crypto transactions )
- Bitcoin Gold: 17,513,924 ( Bitcoin fork changing Bitcoins proof of work algos )
- Bitcoin: 18,195,262 ( you should know by now !!! )
As of cryptocurrency industry continues to age, it will be important to look at supply structure moving forward. Cryptocurrencies with lower supplies will move the heaviest pending demand on a global scale. There are over 5,000 cryptocurrencies now in circulation, and many investors have no idea where to look. Assessing supply can be crucial, because altcoins with lower supplies can ultimately create easier capital appreciation if they truly create worldwide value.
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