How Can a Crypto be Ranked Differently on Different Websites?

These specifics create irregularity when measuring the outstanding number of coins, leading to divergent market capitalization analysis.

This leads to an age-old question in crypto circles…

Is Market Capitalization a Reliable Metric?

Cryptocurrency traders have used market capitalization as the single most relevant metric. All one needs to do is multiply a coin’s current price by the total number in circulation.

Although this is straightforward to traditional markets, this creates some friction in cryptocurrencies. Firstly, one might find price discrepancies between multiple exchanges, although that’s usually not substantial. The problem usually lies on the supply side of the equation.

Is Market Capitalization a Reliable Metric
Cardano market capitalization and supply, May 31. Source: CoinMarketCap

While some cryptocurrencies are reasonably straight and simple to audit the circulating supply, others will hold coins over multiple blockchains. Take the extreme example of Tether (USDT), which simultaneously uses Ethereum, Tron, EOS, Liquid, and Algorand blockchains.

Another example is Binance Coin (BNB), which migrated to its blockchain in April 2019, but not every holder has requested the chain swap. Therefore, there are still ERC-20 tokens in circulation.

CoinPaprika (right) data shows the circulating supply of Polkadot’s DOT token on May 31 at 852,647,705. Therefore, by multiplying it by $21.99, one will reach a $18.85 billion market capitalization. On the other hand, CoinMarketCap (left) displays an 11% higher circulating supply, resulting in a $20.6 billion market capitalization.

CryptoCompare, another well-known website for cryptocurrency rankings, uses an entirely different methodology for calculating the circulating coin supply. For non-minable assets like Polkadot, the data provider includes the entire supply minus burnt tokens. Therefore, using the whole 1,079,028,162 supply inflates DOT’s market capitalization to $23.8 billion, nearly $5 billion higher than CoinPaprika’s data.

The difference in total supply can reach an impressive 350% in some cases. For example, CoinMarketCap and Coinlib list OKB Token (OKB) with 60 million coins in circulation, while CoinGecko and CryptoCompare list close to 270 million. This data led to OKB securing the 32nd spot at CoinGecko on May 31, while the token ranked 93rd on the remaining ranking sites.

The fully diluted market capitalization figure is another potentially misleading indicator, as it uses a questionable max supply for calculation. While some websites will discard burn tokens according to a project’s proposed burn calendar, others are more conservative.

How to Measure Coins with an Uncapped Supply Limit?

Furthermore, some cryptocurrencies like Dogecoin (DOGE) have an infinite supply, making it impossible to calculate the total supply. Messari Screener uses a metric that considers the 10-year forecast for supply to avoid those issues, thus making it possible to calculate the supply.

One should understand that there is no right and wrong when analyzing cryptocurrencies, at least in terms of supply and market capitalization. Therefore, investors should not blindly trust ranking websites or rely exclusively on such metrics to define whether an asset is under or overvalued.

Some cryptocurrencies such as Compound (COMP), Stellar (XLM), and ZCash (ZEC) present equivalent inflation higher than 10% per year, therefore negatively pressuring their price.

Therefore, understanding how the issuance and burn calendar impacts each cryptocurrency’s inflation-equivalent relationship should be of greater importance than comparing market capitalizations, especially for those aiming to hold for more extended periods.

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