Assets with more circulating supply often trade at cheaper prices in terms of dollar value per coin or token. BTC currently holds a comparatively low circulating supply of about 18.6 million, and even though this number increases slowly based on mining, its maximum supply is still relatively small at 21 million coins. Meanwhile, Dogecoin has a circulating supply of about 128.3 billion, based on CoinMarketCap numbers.
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Generally, assets with low circulating supply can rise higher in price per coin than assets with large supply counts. Yearn.finance’s YFI, for example, holds a very small circulating supply of just 36,635. YFI went from approximately $900 in July 2020 to $40,000 in September 2020. A multitude of other components factor into price rises, but typically, if an asset has a comparatively larger circulating supply, its price per coin cannot be directly compared to the price of coins with a smaller supply.Article:
Why some cryptocurrencies are worth $40,000, while others stay at $0.40I think this is just a non-objective article because the author only considers the effect of the total supply on the token price. On our forum there has been a topic about this problem:
https://www.altcoinstalks.com/index.php?topic=191149.0And I still keep my view on aggregate supply:
We all acknowledge that the price of a token depends on the law of supply/demand in market, and scarcity can reduce selling pressure, while at the same time token price increases.
As such, the total supply affects the token price, precisely the volatility of the token price.
If the total supply is too low like YFI (37K), we see that the price of YFI can easily be pushed up to $45K and then to $8.5K in a short time.
If the total supply is too high like DOGE (128B), if there is no strong support from the community, the DOGE 1 cent increase is also difficult because it means that $1.28B is needed to enter the DOGE market.
Therefore, many projects have used token burning to reduce the total supply to half of the original total supply like BNB or reduce until the community agrees. This has a short-term impact, but in the long run, there won't be enough tokens for the community to use.
Consider Ethereum's case, we now admit that the total supply of Ethereum is infinite, however this does not hinder the development of ETH price, it even makes ETH closer to fiat. As long as ETH's inflation rate is lower than fiat's, ETH price will continue to rise, in addition staking & EIP-1559 will increase scarcity and ensure ETH price is stabler.
Besides the total supply, which I consider to be the store of coin/token ecosystem value, I think there are other factors determine the coin/token price:
+ The real value of the coin/token: for example, using BTC makes it easier for us to transfer money across borders, saving us a few tens to thousands of dollars per transfer. Or 1 token can help users make profits from the liquidity pool, reduce transaction costs... It can be seen that when the crypto economy is quite small, this real value only accounts for a small part of token price;
+ Expected value, majority of token price: we expect that the value of the token will increase in the future as it is widely adopted and gaining interest from many people. Since the value lies in the expectation its volatility is very high, BTC increased from $10K to $48K in a very short time;
+ Minimum cost of mining: miners are the ones who maintain the network to make a profit, they will not continue the work if the profit is not enough to maintain the minimum mining cost;
+ Mental value: for NFT tokens or more simply CryptoKitties with collectible value.
In your opinion, are there any other factors that make up or affect coins/tokens price?