TL;DR

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Introduction

What is market capitalization (market cap) and why should anyone care? In crypto circles, market cap may or may not be a useful metric depending on who you ask (Full Disclosure: I lean toward its uselessness). I’m not going to answer that question in this book because crypto fans come in various stripes. You may think market cap is a bag of dry bones and someone else may consider it the bee’s knees. I’ll let the prophets and the queen debate that issue.

I’m much more interested in highlighting trends. That’s why I conducted this research. I wanted to see which cryptocurrencies stayed near the top on the most popular tracker for the longest during different periods of crypto history.

One might wonder why research the history of the top 10 cryptocurrencies at all. And why market caps? Why not coin prices? What not circulating supply, or 24-hour volume?

These are all great questions. Why care about market cap when it’s all relative? Market cap by itself isn’t a fair representation of a project’s value. So why study it, and more importantly, why write a book about it?

I confess, I have a broader view in mind. My intent is not to promote market cap as a useful metric. Nor is it to compare cryptocurrencies against each other to show why this one and not that one is more valuable. Rather, what I hope to do is highlight the megatrends in different phases of crypto history. This project is a journey, from the mysterious beginnings of bitcoin (BTC) to the far reaches of Web3—realizing, of course, that Web3 isn’t all that far reaching yet.

Long story short, I want this book to show how various cryptocurrencies have risen to the top and stayed, risen to the top for a short period only to fall or fade away, or risen to the top and crashed like an airplane out of fuel. Let’s begin with the basics.

Market Cap, Cryptocurrency Value, and Relevance

In case you don’t know, there is a method for calculating market cap. But don’t worry, there won’t be a quiz. I’ll keep it simple.

Market cap is calculated by taking the current price of a cryptocurrency and multiplying it by circulating supply. For example, if a coin’s price is 5 cents and the circulating supply is 100,000, then its market cap is $5,000 (100,000 X $.05). Comparatively speaking, that would be a low market cap.

Of course, cryptocurrency prices are always fluctuating. On any given day, BTC’s market cap can rise or fall by thousands of dollars, or millions, depending on market forces acting on it that day. As a result, BTC’s market cap changes from one minute to the next, making it difficult to judge its relative importance against other cryptocurrencies at that precise moment.

It’s better to judge market caps by trends than by momentary ground truth. If XRP, for example, moves against the market—price and market cap rise as the rest of the market declines—then that may be a signal that market participants feel good about XRP at that time. And that may be all it signals.

But there’s another kink in this garden hose. Circulating supply is almost never accurate. For any cryptocurrency, there may be tokens or coins locked in a wallet with inaccessible keys. If a wallet is holding thousands, or millions, of a cryptocurrency that no one can access, then those are not really “circulating.” And there’s no reliable way to know how many of a particular cryptocurrency might be locked up and unavailable for trading at any given time.

There are many reasons a cryptocurrency might hold a certain value. Market cap, however, isn’t a measure of a value so much as it is a rough measure of market sentiment. Serious investors go beyond market cap and delve into project fundamentals. But this book isn’t about investing, and it’s not just for crypto investors.

Who is it for then?

The Ideal Reader for Diamonds and Pearls

The crypto market today has many different types of participants. Long-term investors, day traders, project managers, gamers, project contributors, entrepreneurs, developers, to name a few. I didn’t write this book for any one class among these. I suspect there are three types of people who may be interested in this subject matter, as I am:

1. The curious

2. Journalists and bloggers

3. People interested in long-term and short-term crypto market trends

That third category could consist of investors, developers, project managers, bounty hunters, entrepreneurs, people searching for their next crypto job, and anyone else who thinks the patterns of the past can highlight important trends for the future. I realize that’s a broad sweep, and I’m proud to be holding the broom.

How Diamonds and Pearls is Organized

In writing this book, I may use “price” and “value”, or “market value”, as synonymous terms. That isn’t intentional. I did not pay to have the book professionally edited as I have other books I’ve published. I beg your forgiveness if any of the language is imprecise. As stated, my intent is simply to show market trends where market cap and market sentiment are concerned. Nothing more.

To that end, the larger purpose is to show how market caps over time highlight some worthwhile projects and how the market itself has catapulted certain projects well beyond their true value. I’ll refrain from identifying which is which because different market participants value different ideals in the projects they support, but the insights gained from this study could be valuable to you in ways that I have not imagined.

The material is covered year by year and quarter by quarter. In each case, I discuss the top crypto projects of that period, where they came from, significant or interesting market differentiators in some cases, relevant historical details, and how the market has grown over time.

In my evaluation of market caps and news cycles, I’ve placed top 10 cryptocurrency projects in three categories:

1. Diamonds - These are solid projects with strong historical performances and appear likely to remain at the top of the market for a while.

2. Pearls – These are projects that are fundamentally strong but whose market caps may not reflect it. They typically rise high for a short time then fall but not too far out of view.

3. Pebbles – These crypto projects rise like a hot air balloon and plummet upon deflation.

Diamonds tend to rise into the top 10 and stay for a while. Pearls rise high and fall out of the elite club even as price and market cap continue to climb. They may also see a decline in price and market cap due to market cycles but their relative value to other projects is solid. These are important distinctions because market metrics are relative to each other. Diamonds are highly valued gems that continue to perform better than the market overall whereas pearls can grow in value but at a slower pace than the market, or simply grow slower relative to other super performers.

By contrast, pebbles are those gritty shitcoins that have no intrinsic value and should never have been invited to the country club to begin with. We collectively wonder how they ever made it to the top 10. They usually die and become the fertilizer for the next season’s crop.

When CoinMarketCap launched in 2013, it changed the way crypto market participants analyzed projects. It provided useful data for determining which projects had serious potential, or were gaining in popularity. While it was difficult to analyze projects before CoinMarketCap because data was compiled from various sources, some of which were not reliable, there also weren’t that many projects to analyze. Evaluating the market today without CoinMarketCap is nearly impossible. That’s why it’s important to look back over the past 14 years to see how the most prominent projects compared to others of the time, and to see where those projects are today now that the market has matured.

Without further ado, let’s dive in and sample the cheese.

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