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Apples to Apples When Investing in Crypto Land!
Within the crypto space, there are many different categories, some of the common ones being; decentralized finance (DeFi), gaming & metaverse, Non-Fungible Tokens (NFT’s) and collectibles, cloud, Internet of Things (IoT), oracle’s, decentralized exchanges (DEX’s), privacy, infrastructure projects and many more.
In my opinion, when investing in a particular project, it is wise to compare it to the market caps of its competitors within the same category. Combined with fundamental analysis, this will provide a more realistic view of the potential market cap that your investment could reach.
Let’s say you are keen on investing in a metaverse project, “MetaForce.” MetaForce has a good team, fundamentals, and a market cap of $1 billion. As part of your analysis, you need to gauge (in realistic terms) what market cap MetaForce could potentially reach. Has MetaForce significant room to grow compared to its competitors?
For example, there is no point in comparing metaverse projects to infrastructure projects (ETH, DOT, ADA, BNB, SOL) and vice versa. Infrastructure projects have extremely high market caps compared to metaverse projects. To gauge more realistic potential profits, you would need to compare MetaForce to other metaverse projects like Decentraland (MANA), which has a market cap of $4.9 billion (at the time of writing this). With this, you can see that you are looking at a 5x to the highest market cap of other projects within the same category.
To go the extra mile, you should also factor in the total supply, circulating supply, and lock-up/vesting release schedule. This mainly involves long-term investing. It may be a case that only a tiny fraction of the max supply is in circulation, which is why the market cap looks so small. But the project in question may have a sizeable token release a few weeks after, significantly increasing the market cap. The higher the market cap, the harder it is for the price to do the X’s we are all looking for. So, it is good practice to take everything into account.
Thank you for reading, and I hope you found some value. Have a wonderful day!
Pauls Crypto Calls can be found via the links below:
Blog: https://paulscryptocalls.com/en/
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