Altcoins and tokenomics
Lesson 31 of 39 in the course “Crypto”. Free, with animations and a quiz.
What to check in a token
An altcoin is any crypto coin other than bitcoin. Tokenomics are the rules for how many tokens exist, who holds them and when they reach the market. The key point in the picture: some tokens already circulate, meaning they trade, while others are locked and will come out later. Check four things: supply, who owns the tokens, the unlock schedule and the project's real use.
Three kinds of supply
Supply is how many tokens exist. Example from the picture. Maximum: 1 billion (1B), no more will ever be created. Total: 800 million, already created. Circulating: 100 million, actually trading on the market. The rest waits for unlocks, the moments when team and investor tokens become available to sell.
Unlocks put pressure on price
An unlock is the day when tokens locked up for the team or investors become available. Supply on the market grows, as in the picture. If demand falls short, the price often sags: many recipients got in cheap and want to take profit. That is why people check the unlock schedule in advance, not after the drop.
Market cap and FDV
Market cap is price × circulating supply. Example from the picture: $2 × 100 million = $200 million. FDV (fully diluted valuation) is price × maximum supply: $2 × 1 billion = $2 billion. A 10x gap means 90% of the tokens are not on the market yet. When they arrive, the price will have to absorb a lot of new supply.
Hype and greed
The picture shows the fear and greed index: a scale of market mood from 0 (fear) to 100 (greed). When it is high, people ride the hype and buy tokens without looking at tokenomics. A classic trap: a coin seems "cheap" because it costs pennies. But price per coin says nothing without the number of tokens. Compare market cap and FDV, not coin price.
Why a penny coin is not cheap
Example from the picture. Coin A costs $0.01 with 100 billion tokens: $0.01 × 100 billion = a $1 billion market cap. Coin B costs $50 with 10 million tokens: $50 × 10 million = $500 million. A is "cheaper" per coin but valued at twice B. For A to grow 10x, its market cap would have to reach $10 billion. Bottom line: look at the valuation, not the price tag.
Check yourself
- What is a token unlock?
Correct answer: Locked tokens entering the market. At an unlock, team and investor tokens become available. Supply grows, which can put pressure on the price. - A token costs $0.001. Does that make it cheap?
Correct answer: No, look at the market cap. Price per token says nothing without the token count. Market cap shows the valuation: price × tokens in circulation. - What is FDV?
Correct answer: Price × maximum supply. FDV shows the valuation as if every token were already on the market. Price × tokens in circulation is ordinary market cap.