There have been a huge number of changes for 5 years of the existence of the cryptocurrency market. In the framework of this article, we will plunge a bit into history and look at the cryptocurrency market, we will try to formulate some conclusions and make certain forecasts.
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- The concept of capitalization and its interpretation in the cryptocurrency market
- History of changes
Such a term as “capitalization” is a certain financial characteristic. It has a wide application in the financial markets, where it means a total assessment of the value of the company’s assets, of the market as a whole, etc. For example, a company enters the stock market and issues an unlimited number of securities. One share costs $100, and their total number is 1,000 pieces, in this case, the market capitalization of this company is $100 * 1,000 pieces = $100,000.
The value of one security is tied to any physical assets. What about the cryptocurrency? After all, they have nothing to do with offline but are strictly in the digital space. Here comes into force the second law of the formation of the price of the asset, which is reinforced solely by the faith of investors in the company’s success, coins, etc. For a good example, you can take the notorious company Tesla, which produces the most technologically advanced electric vehicles in the world. Its market capitalization (at the time of writing) is about 53.44 billion dollars.
CEO of the company, Elon Musk, admits that this figure is still far from the real value of all the physical assets of the company. This imbalance is caused by the faith of investors in the bright future of the company, which at the moment, unfortunately, only brings losses.
The same mechanism encourages investors to buy Bitcoin and other promising altcoins, in the hope of a bright future of the cryptocurrency. Capitalization of a certain digital currency is calculated in the same way: by multiplying the total number of coins by the market value of one token.
It is worth noting that although Bitcoin was created in 2008, but such a concept as the cryptocurrency market was formed only in April 2013. At that time, the price of one BCT coin was $130, the total capitalization of the market was slightly less than $1.6 billion.
The year of 2013 became quite profitable for the earliest investors and the market showed almost 10 X by the end of the year. In December of the same year, Bitcoin overcame the first serious psychological mark of $1000, and the total capitalization was already over 10.6 billion dollars.
This was the first large-scale euphoria and news about cryptocurrencies began to appear in the media. But the joy did not last long, because after this rapid growth, the next quite expected market phase – correction – followed. To say that it was dragged out is not to say anything. In 2014, digital coin rates fell and in early 2015, the market lost almost half of its peak value: the capitalization was about 5.5 billion dollars.
At that moment, only the lazy person did not speak about the “burst bubble” of cryptocurrency. Indeed, the industry was still too unstable, it could easily die silently, but it was not abandoned by the most psychologically stable and loyal investors.
In 2015, the market stagnated, but as a result, it showed not a significant growth: over 12 months, capitalization increased to 7 billion.
And finally, in January 2016, everything changed: the two-year recession and stagnation ended, they were replaced by long-term and long-awaited growth. Over the next 12 months, the market rose to a mark of 18 billion. Such a situation in the industry gave birth to a huge number of new coins and encouraged a large number of investors to enter the market.
2017 can be called the best for cryptocurrencies in the whole history (for this moment). These 12 months brought unimaginable growth and on January 7, 2018, the historical maximum of market capitalization was registered, it amounted to 826 billion dollars. This is neither more nor less than 4600% per annum.
After such a rapid growth, the market is quite expected to turn into a correction, which is partly continuing at the moment. Although, the global recession ended at the beginning of the second quarter of 2018. The last months are more like stagnation, which is accompanied by price fluctuations within the range of 250-400 billion dollars.
Now the media is also in a decadent mood, many skeptics have already buried bitcoins and other digital coins. The current situation is very much reminiscent of the correction of 2014-2015, but with one significant advantage: now the industry has already a lot more adherents, it is recognized in most countries with the leading economy in the world.
Recently, the G20 summit took place, at which the governments of the G20 countries came to the conclusion that the cryptocurrencies do not carry any threat and nobody is going to ban them. On the contrary, until October 2018, unified world standards should be developed, which will serve to the arrival of institutional large investors on the market, which in turn will cause growth and hope for another long-term trend reversal.
Capitalization is calculated by multiplying the price of one coin by the total amount of the issuance of the cryptocurrency. The history of the value of the digital coin market can give some idea of possible future development scenarios. After all, as it is known: “The past is the teacher of the future.” This also applies to financial markets, since the processes that occur on them are cyclical. For example, in 99.99% of cases, after a sharp rise in the rate of a certain asset, a correction follows, which, eventually (if there are no fundamental constraints), will be replaced by another phase of growth.
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