cryptodailytrading.com

Does a Bigger Market Cap Mean a Better Blockchain Company?

  • Darryn Pollock
    ⭐ Features

    Coinmarketcap.com is visited by hundreds of millions of people, so what does it mean for a token that cracks the top 100?


Does a Bigger Market Cap Mean a Better Blockchain Company?
You may also like:
Contents

Since the Blockchain boom in the early part of 2017, there have been a number of Blockchain companies emerging with an idea that a cryptocurrency or a Blockchain token can be a disruptive force and affect a specific targeted sector.

However, there have also been a lot of failed ICOs, poor businesses, and fly-by-night scams. The frenzy around ICOs made it easy for a lot of projects to earn money without any checks or balances, and a lot of money fell into some bad investments.

Essentially, it came down to the value of the business and whether it was making progress. Because of the speculative nature of the ecosystem, determining that was hard to do in any other way than on hearsay.


But, there is one overarching metric in the Blockchain space which spells out the worth of Blockchain companies along with decentralized cryptocurrencies, and that is their market cap. Market cap rankings seen on sites, such as coinmarketcap.com, are viewed as an important measure, but they are a measure of a successful or potentially successful company.

If one starts to understand the market cap and the value of a company’s tokens as an intangible asset and a way to measure the equity of these new and unprecedented companies, then they must follow that success in the market cap rankings is the equivalent to a successful and valuable company.

A new breed of intangible assets

Traditionally, one way to value a company was through the equity and tangible assets. Intangible assets, like brand power and other more technically valuable things, were always hard to consider unless an IPO or publically traded stocks became available.

However, with the tech boom, companies like Microsoft and other tech giants relied much more on an intangible valuation of their company. Now, with the boom of Blockchain companies and the definite need to value them in discovering if they have what it takes to succeed, there needs to be a new metric.

To this end, considering the value of a company’s tokens, its growth along the market cap and the interest it receives from a decentralized investor base can be considered an even better way to determine intangible value.

The value of the market cap

There is a number of benefits that come with firstly breaking into the top 100 market cap rankings, and there is even more when the value of a company continues to rise through the rankings.

Nexo, a cryptocurrency-backed loans company, recently saw the advantages that came with cracking the top 100 market cap after a bout of good news and decisions from the company.

Nexo is currently sitting at 62 in the market cap rankings, not having been featured in the top 100 less than a month ago. For Antoni Trenchev, one of its co-founders, there is a lot of good that comes with this for their company and the Blockchain space.

“For those on the outside looking in, it is often the first port of call to determine the size of a business,” Trenchev explained about sites like coinmarketcap.com. “I believe this rise up the market cap standings is not only a magnificent milestone but also a good space to be recognized by potential customers and investors. It is also a recognition that the company is doing well, especially in terms of how we deliver our crypto loans.”

Trenchev believes that with the current climate, especially for ICO companies, it is now more important than ever to show growth and deliver on promises. The bearish market has made it difficult for cryptocurrency companies, and the so-called ICO bubble has made it even harder.

“Because Blockchain companies are still so new, and as such, are trying to find their feet in the global market, they have been increasingly difficult to value. There have been things like ICO bubbles and a huge hype that have overinflated the price and value, but those companies that have succeeded and stuck through it are now starting to shine,” he adds.

“In the very near past, we had quite unrealistic valuations of Blockchain companies that were clearly unsustainable; a market cap of $1 bln for a company can be quite elusive as liquidity apart from very few of the 2000+ crypto assets is no way near liquidity in the traditional stock markets.”

“Now, after a few months of a market correction, we are seeing a normalization of valuations which is a positive outcome, and this is ultimately a good thing.”

Value at the top

The thing with the market cap rating is that it is a very dynamic and fluid ranking system. Coins that were near the top can easily fall away and crash to nothing. The market cap of a company surely has some effect in determining its value, but that value needs to maintain and grow for there to be a real belief that the project is solid.

Trenchev makes decent points about additional advantages that come with reaching a promising point on Coinmarketcap, and those advantages need to be absorbed and grown in order to help the company be a success.

If a company cannot maintain its high standing in market cap rankings, it is probably a bigger red flag than if it is lower down the rankings but at least steady.

In this Telegram channel you’ll find fresh news, interviews, infographics, forecasts & other helpful stuff. Join U.Today's channel.
👓 Recommended articles

Question of the Day: Can Stablecoins Accelerate Cryptocurrency Adoption?

  • Yuri Molchan
    ⭐ Features

    Stablecoins show hardly any volatility compared to Bitcoin and altcoins, many are hoping that they will be able to bridge new crypto economy and regular fiat money


Question of the Day: Can Stablecoins Accelerate Cryptocurrency Adoption?
You may also like:
Contents

Bitcoin, the father cryptocurrency, emerged in hope that it will remove all intermediaries in electronic commerce that cut off their share of payments. BTC was perceived as a P2P way to replace fiat cash in an electronic format, which would enable one party to pay another without any financial institution or payment platform which would demand its share of a transaction as a reward for its services.

What is wrong with Bitcoin

For quite a while Bitcoin was performing the way the crypto community expected. But the situation changed later – BTC rate became weaker, thus bringing down its financial and economic reliability, when it gets to be used as a regular means of payment.


You cannot have a currency that would cost like a British castle today, a gram of gold – tomorrow and a pack of French fries the day after.

At that point practical fintech minds came up with an idea of creating something which would become a breakthrough in the universe of crypto – a so-called stablecoin.

Will stablecoins solve the volatility problem?

Technically, stablecoins are protected from the volatility roller-coaster that Bitcoin and other cryptos love to ride. They are programmed to keep their prices stable and investors now are largely attracted to this new type of digital assets.

Stablecoin does not show any volatility in its monetary value, since it has a fixed connection to an asset it is pegged to. The major goal of using stablecoins is taking the best from decentralized crypto coins and combining it with a constant value. Thanks to it, stablecoins can be used as a reliable means of trade.

Asset-pegged stablecoins

Asset-backed ones get their value from an asset as can be understood from the name. An asset provides the necessary value to a coin, as well as the necessary legitimacy.

A great example of an asset-pegged stablecoin is Tether (USDT). In spite of a series of scandals at the end of last year, it remains the most popular stablecoin in the crypto market.

Recently, it has partnered with the Tron Foundation to launch a Tron-based stablecoin.

Other examples are TrueUSD (TUSD), USD Coin (USDC), the Gemini Dollar (GUSD), and the Paxos Standard (PAX). They are all pegged to the USD.

Crypto-backed stablecoins

Some digital coins work in a similar way to fiat-backed ones, however, they are pegged to collateral crypto. That means that crypto assets that ensure the value of such stablecoins are stored in a wallet similar to escrow.

A good example of a crypto-pegged token is Maker, which is ranked 16 on CMC.

Algorithmic stablecoins

Even though, stablecoin can be interesting at first thought but the way they are built goes against the principle of decentralization that crypto coins have as a foundation. Thus, many crypto fans and evangelists are positive that stablecoins must be linked towards not a centralized asset but a computer algorithm which takes value from a balance between supply and demand.

Basis is now considered the most promising algorithmic stablecoin of all.

👉MUST READ John McAfee Says Exactly When Bitcoin Will Hit $1 Mln, IBM’s Jesse Lund Goes for More Modest Forecast
John McAfee Says Exactly When Bitcoin Will Hit $1 Mln, IBM’s Jesse Lund Goes for More Modest Forecast

Can stablecoin ensure smooth future for the crypto industry?

The primary goal of all crypto assets was and remains to come up with virtual asset that would be liquid enough and not vulnerable to market volatility. From this point of view, stablecoins are a dream of all crypto fans and evangelists of a decentralized economy.

Apart from the potential to conduct crypto transactions smoothly, experts believe it can bridge the two worlds – fiat and crypto, bringing them a mutually beneficial coexistence. However, that may take time.

Subscribe to U.Today on Facebook, and get involved in all top daily cryptocurrency news, stories and price predictions!
👓 Recommended articles