Understanding Market Caps: A Key Factor for Altcoin Investing

Just a friendly reminder for everyone considering investing in altcoins: instead of focusing solely on the USD value, it's important to look at the market cap of the altcoin you're interested in. Simply because it's a project you like and it's currently 99% down from its all-time high during the previous bull run, doesn't guarantee that it will reach that price again. This is primarily due to the possibility of dilution in the altcoin's supply. More coins could have been released since the previous all-time highs, making it even more challenging for the altcoin to reach its previous peak.

Let's take Filecoin as an example. Filecoin is a decentralized storage solution coin that experienced an all-time high price of $237.62 on April 21, 2021, with a market cap of $12.3 billion. Today, it sits at a mere $4.80, with a market cap slightly over $2 billion.

If we only look at the price of the coin, one might think that it has the potential to increase 50 times if it were to reach its previous all-time high. However, a closer look at the market caps reveals the true picture: a 50x increase would mean Filecoin would need to have a market cap of $100 billion, which is more than eight times its previous all-time high market cap!

For Filecoin to reach its previous all-time high from its current price, it would need to achieve a 6x increase (from a $2 billion market cap to a 12 billion market cap), putting it at a price of $28.8. Don't be deceived, as most coins have undergone significant dilutions, making it much more challenging to reach their previous all-time highs!