Free Float Impacting Cryptocurrency Prices

To say the last few months in the cryptocurrency markets has been exciting would be an epic understatement.  If you’re a Bitcoin holder, the value of that asset (as of the date of this article) increased 4.54 times in the past 12 months with over 2/3 of that increase falling in the last 2-months.  If you held Ethereum in that same timeframe, you’ve seen a jump of 7.1 times the original value.  Swings in the value of these assets can be triggered by a variety of events, from underlying confidence in Fiat Currencies (like the dollar that are not tied to a reserve of a commodity such as gold) to how willing people are to cash out of their investments.  If you are a chart watcher, the article Bitcoin’s free float declines to just 13% of its total supply — lowest since 2014 is a great look at the various cryptocurrencies and the free float (essentially the percentage of the asset that is likely to be tradeable in the short term) associated with each of them.  Historically, a drop in free float for Bitcoin leads to an increase in price.  Not all cryptocurrencies are similarly impacted and this is sometimes tied to the type of asset the coin represents.

While reading that article I was struck by the variety of cryptocurrency asset categories that are out there and further the way those are described / named across various authoritative sites.

Rundown of Different Types of Cryptocurrency Assets:

  • Currency:  Literally its own commodity.  The value is not tied to a fiat currency or any other asset.  It is often described as “Digital Gold”.  Examples – BitCoin, LiteCoin
  • Stablecoin:  The value of this category is tied to a reserve of another asset of known value (ironically, often to a Fiat Currency such as the USD).  Also referred to as a “Digital Fiat”.  Examples – USD Coin, Tether, Dai
  • Software Platform:  The value of this currency is stated to be the platform it runs on.  Essentially an ability to create blockchain evidence of exchanges or contracts that are undeniable.  Examples – Ethereum, Cardano, EOS
  • Application Token:  Also called Utility Tokens.  Used for payments on a specific network.  Examples – Chainlink, Ox, OMG Network
  • Privacy:  Cryptocurrency aiming to provide enhanced privacy for owners/traders.  These are often based on forks of other cryptocurrencies.  Examples – ZCash, Monero, Dash

Visit CoinDesk for a deeper dive on most of these asset types.

Regardless of your currency of choice, the run-up of Bitcoin and nearly all cryptocurrency coins (other than Stablecoins) makes the economics of mining cryptocurrency staggeringly favorable!