How to Use Volume, Circulating Supply, and Market Capitalization Amounts to Trade More Effectively

Disclaimer: Any information in this article is general information and should not be used or misconstrued as advice when making trades on Amplify Exchange or any other service. Amplify is not liable for the personal decision to use this information.  

 

Beyond the recent changes in price of a given coin or token, there are multiple factors to consider when making decisions and trading. When making trades on Amplify Exchange, we provide the information for three of the main indicators of a given coins and tokens health and frequency of trading: Volume, Circulating Supply, and Market Capitalization.

Volume

Volume is the amount of a coin that has been traded in the last 24 hours. This can demonstrate the health of the coin, and the value that other traders are placing on recent moves in the market. As an example, if a price on a token drops, but the volume remains low, it can imply that traders may be speculating the value to stabilize or even rebound.

Circulating Supply

This is the an estimation on the number of coins that are in the market and in the general public's hands. It is used as the standard measure instead of the Total Supply, as some percentage of the Total Supply also includes coins that are locked, on reserve, or just generally not for sale, and as such the coins not for sale cannot affect the value of a token.

Circulating supply can be used as an indicator of value, as cryptocurrency on a market or exchange is subject to the balance of supply and demand. This is why many coins are subjected to buyback and burn campaigns to help stabilize the value by taking some coins out of circulation and reducing the volume. A coin with a high volume that is not subjected to a burn campaign can be more easily impacted by inflation and devaluation. Knowing these factors, along with research about the coin itself, can help make decisions about whether to trade for a coin.

Market Capitalization

Market Capitalization (Often Shortened to Market Cap) is the total number of coins circulating of a given coin multiplied by the price of the coin. Market Cap is a good tool to know how much risk is involved when trading a token. 

Cryptocurrencies are generally divided between Large Cap, Medium Cap, and Small Cap.

Large cap coins like Bitcoin, Ethereum, and Ripple present less risk, but growing to a certain size limits a their growth potential.

Small cap coins inherently present more risk because of potential failure. Additionally, while one of the smaller cap coins may sell at a lower price, you’re buying into less value. However, these cryptocurrencies also have more potential room for growth, and if they do, they can yield tremendous reward to supporters when they succeed.  

To conceptualize this, a small cap coin may only be valued at $1.00 USD, compared to medium cap token valued at $100.00 USD, and finally compared to a large cap token like Bitcoin valued at $10,000.00. The smaller value of the small cap coin means it is easier for a small cap coin to double in value, as it would only need to gain $1.00 of value versus gaining $100.00 or $10,000.00 to do so. But, the risk is that the smaller cap token may fail or collapse without support. 

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