How is the price of a cryptocurrency calculated? (Let's use $XRP as an example)

Before we get into the calculation, it is necessary to understand some important points:

Total Supply: This is the total amount of tokens minted at the beginning of the project. (XRP has 100 Billion of total supply)

Initially, only a part of this total is made available for trading on the market and the rest is gradually released over time.

Circulating Supply: This is the amount of tokens currently available for trading on the market. (XRP currently has 57.05 Billion)

This amount increases as periodic unlocks occur from the Total Supply and are released according to each project's schedule.

Market Capitalization: This is the amount of money that was raised from the sales of the circulating supply. (XRP currently has $143.87 Billion)

So, if you divide the market capitalization by the circulating supply, you will have the current value of the Token. But we can go further...

If we want to know how high a token's value can go, we can do the following calculation:

Circulating supply multiplied by target value.

Let's say I expect $XRP to reach $10, so we'll do...

Circulating supply(57.05 Billion) * Target value($10) = Market cap ($570.5 Billion)

We would need $570.5 BILLION dollars to flow into $XRP ! That's more than the market cap of $ETH, which currently stands at 443.14 Billion.

But remember the total supply? We still have almost 50% of XRP to be released to the market, and that means the market cap needs to be much higher than the one used in the calculation above to reach the desired target price.

In short, is $10 possible for XRP? Yes, but it won't be easy or quick!

I'll let you do the calculation for higher values ​​now that you've learned and see for yourself the limits that each cryptocurrency brings with it.

Good luck and fortune to all 🙏💰