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Wednesday, 14 July 2021
Crypto Notes
A weekly newsletter decoding crypto, blockchain and the entire ecosystem.
By Rohas Nagpal

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Editor’s Note:

Zooming rocket ships 🚀, epic crashes 🌊, dizzying waves of wealth creation and destruction 💥, and ads on television 📺 that talks up bitcoins ₿. Cryptocurrencies and blockchain, the underlying technology that is thought (by some) to hold great promise, have rocked our world in the past few years.

From believers who think cryptocurrencies will take over the world to sceptics who think the appropriate value of Bitcoin is zero, opinion is sharply divided. The two sides are also fond of exchanging barbs on social media, making this entire space, with its memes, insider lingo and roller coaster charts, a fun space to watch, especially if you are not invested in crypto.

That’s why Mint is bringing you a new weekly newsletter on crypto, blockchains and everything associated with these spaces. Authored by technologist Rohas Nagpal, Crypto Notes will cover the developments in this heady world and explain their meaning.

Last week we discussed what you get when you buy cryptos, and this week, we will look at the metrics that every crypto investor should know.

Did you know?

SHIBA INU (SHIB) has a total supply of 1 quadrillion. That’s one followed by 15 zeros.

An unlimited number of ETH can be issued.

USDT’s velocity ratio is almost 18 times that of Bitcoin’s.

Before we dive into the metrics, let’s quickly go over some recent crypto developments:

The much-awaited Indian law on regulating crypto is expected to be introduced in Parliament next week.

Anthony Hopkins’ new film “Zero Contact” will premiere as a Non-Fungible Token (NFT). Each “drop” of the movie will be an exclusive, limited-edition version of the film and collectable content.

A group of derivative traders are suing the world’s largest crypto exchange Binance for trading losses suffered due to outages of the platform. This case could set a global precedent on the liability of exchanges.

Argentina is considering a law to enable salaries to be paid in cryptocurrency.

Paraguay may become the second country in the world after El Salvador to make bitcoin legal tender.

Circle, one of the entities behind the USDC stablecoin, is going public at a valuation of $4.5 billion.

9 metrics that every crypto investor must know

If you are serious about crypto investing, then these are the nine metrics that you absolutely must know about:

1. Circulating supply

2. Maximum supply

3. Total supply

4. Market capitalization

5. Fully diluted market capitalization

6. Volume

7. Velocity

8. Price highs and lows

9. Holders’ statistics

Note: Numbers quoted are as of 11 July

1. Circulating supply

This is the number of coins that are circulating in the crypto market and are in public hands.

For Bitcoin (BTC), this figure increases every few minutes as new bitcoins are generated with every block that is mined.

2. Maximum supply

This is the maximum number of coins that will ever exist in the lifetime of the crypto.

The maximum supply of some cryptos is:

Bitcoin (BTC): 21 million

Cardano (ADA): 45 billion

Ether (ETH): Unlimited

Yes, you read that right! An unlimited number of ETH can be issued.

3. Total supply

This is the number of coins that have been already created, minus coins that have been “burned”.

In the case of Bitcoin (BTC), the circulating supply is equal to the total supply. SHIBA INU (SHIB) has a total supply of 1 quadrillion. That’s one followed by 15 zeros!

4. Market capitalization

This is the total market value of a crypto’s circulating supply.

Market Capitalization = Circulating Supply x Current Price

Bitcoin (BTC) has always had the highest market capitalization, and Ethereum the second highest in the history of cryptos.

5. Fully diluted market capitalization (FDMC)

This is the market capitalization if the maximum supply is in circulation.

FDMC = Price x Max Supply

If the maximum supply is unknown or unlimited, then:

FDMC = Price x Total Supply.

If the maximum supply and total supply are both unlimited, then we can’t calculate the FDMC.

6. Volume

This measures how much crypto was traded in a specific time, usually 24 hours or seven days.

7. Velocity

Crypto velocity ratio or velocity is the number you get when you divide the 24-hour volume by its / market capitalization.

Velocity = Volume / Market Capitalization

I recommend that this ratio be used to determine if particular crypto is a “currency” or not. Crypto that is used as a medium of exchange will have a higher velocity. Let’s take some examples:

USDT: 0.5757

ETC: 0.3112

LTC: 0.1376

XRP: 0.05279

XMR: 0.04011

BTC: 0.03258

The numbers above speak for themselves. A stablecoin like USDT has a very high velocity and is used as a medium of exchange. That’s one of the most important use cases for stablecoins.

Bitcoin’s velocity is comparatively very low, and this kind of proves that Bitcoin is more a store of value and not a medium of exchange or currency as feared by most governments.

8. Highs and lows

Many people don’t know that BTC is not always the most expensive crypto. It has been overtaken at times by (YFI).

Apart from all-time-high (ATH) and all-time-low (ATL) prices, the following high and low price related metrics are important: 24 hours, seven days, 30 days, 90 days, and 52 weeks.

9. Holders’ statistics

In the crypto universe, whales are addresses that own more than 1% of the circulating supply of crypto. Likewise, investors are addresses that own 0.1% to 1% of the circulating supply of crypto.

Some of the important metrics related to holders of crypto are:

The total number of unique addresses that hold assets in the network.

Addresses that have been active over the last 24 hours and seven days

Transactions carried out by the top addresses by balance

Next edition: Crypto indexes and stacks

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Rohas Nagpal is an author, an amateur boxer, a blockchain architect, a Tintinologist and a retired hacker.

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