Understanding the importance of marketcap and liquidity is crucial to making educated investment decisions. It does not matter how revolutionary a coin or token is if the tokenomics is messed up.
In the future I will definitely make a video regarding whether or not marketcap matters in cryptocurrency projects. The marketcap of a cryptocurrency does not matter if the liquidity does not match or surpass the marketcap. If there was a coin or token with a supply of 1,000,000 and the price was $1 then the marketcap would be at 1,000,000. The marketcap of a coin or token is simply stating how much money could be extracted from that asset if every single coin was to be sold at that current price. If the liquidity of that coin or token is not the same or higher than the marketcap it would mean that when users begin to sell it would cause heavy price impacts and it would drop the price of the token significantly. This can drop a marketcap by huge percentage points in the matter of a second. However, if the liquidity of a coin or token is the same or higher than the marketcap it would lead to less price impact and allow individuals to sell their assets at a favorable marketcap valuation. A lot of digital asset projects today trick investors with over bloated marketcap valuations and have little liquidity to show for that valuation. Again, at some point I will make a more in-depth video about this.
Thanks for reading,
Mcdharyl Evra
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