Developing Key Statistics and Fundamental Measurements for Cryptocurrency Investing and Trading
This article is a work in progress.
As of June 26, 2021, when you search cryptocurrency fundamentals or key statistics, you mostly see articles on blockchain technology or basic ideas to help people understand the main ideas around major cryptocurrencies such as Bitcoin.
When you research or invest in stocks, you look at fundamentals such as management, future outlook, and supply/demand of products, and services. You’ll also consider key statistics such as debt, liquidity, price and earnings relations, and more.
Anyone in commodities will have their own fundamentals such as expectations on demand, which countries are publicizing an increase in infrastructure funding, and if there is going to be an abundance of supply in the near future because of a new technology or resource site.
All of those considerations are ways for people to analyze whether their investment will grow or not.
With cryptocurrency being so new, now is a great time to start sharing this type of information so people can become aware of the opportunities to make money as cryptocurrency matures. In the future, there may be a website like CoinMarketCap that allows visitors to see these statistics and decide on trading opportunities.
These “statistics” will be very different than stocks due to the nature of investing in or trading virtual cryptocurrency. The following are just a couple suggestions of equations or ratios we can start using to evaluate cryptocurrency. More may come in the future, and the names may change.
- Percent of Total USD Currency (PTUC)— A measure of a cryptocurrency in value against the amount of Total USD in circulation.
According to the government website, US Currency, there is currently over $2.040 trillion in US Currency in circulation. We can measure how much percent of a cryptocurrency compared to the total US Currency.
Equation: Current Cryptocurrency Market Cap / Total USD Currency (latest figure)
Example: Bitcoin current market cap as of 06/26/2021: $584,480,121,208
584,480,121,208 / 2040700000000 = ~28.6%
Analysis: Cryptocurrency being a combined total of all the worlds currencies (not limited to the USA) — this can give us an idea of how “high” this number can go which will most likely be more stable down the road. One will have to decide on a specific percentage” where it is reasonable for any single cryptocurrency to exceed. For example, if you believe Bitcoin should never exceed 80% PTUC, then it is probably still going to grow right now, but if the number was closer to 78%, you may be more cautious. But you might also use it for other cryptocurrency to measure it against the leading cryptocurrency (or MCR — as defined below)
Source: https://www.uscurrency.gov/life-cycle/data/circulation
2. Market Cap Ratio (MCR) — A measure of any single cryptocurrency against the current leading cryptocurrency.
According to Coin Market Cap, the leading cryptocurrency is Bitcoin which should come as no surprise. At the very moment of writing this, the value of BTC at 06/26/2021 is $584,480,121,208 (and could change very quickly).
Equation: Top Leading Cryptocurrency Market Cap Value / Selected Cryptocurrency Market Cap Value.
Example: Bitcoin with a market cap of $584,480,121,208 and Dogecoin with a market cap of $30,847,414,070.
$584,480,121,208 / $30,847,414,070 = 18.95
Analysis: This ratio helps to determine the value of a selected cryptocurrency in relation to the leading cryptocurrency. Bitcoin is currently has a ratio explaining it’s current market cap value at 18.95X that of Dogecoin. The number can be a measure for a number of things from value compared to other coins. This can be especially helpful when they are viewed side by side.
3. Future Ideas — Need an equation that compares the future rate of growth (depending on predictability of a cryptocurrency in terms of total supply) compared with current value.
Any website can easily implement this by including some simple equations into their charts. As mentioned, this is a work in progress, so perhaps more people will come up with better ones in the future, plus an authoritative source will be helpful.
