The Flipping Of LEO/HIVE And Why It Doesn't Matter
There is already banter about the price of LEO surpassing that of HIVE. To me, this is a lot of nonsense that shows how people focus upon the wrong stuff.
Of late, there is conversation about the Flippening, where the market cap of Ethereum surpasses that of Bitcoin. Notice how there is no mention about the per unit cost.
There is a reason for this: it doesn't matter.
When comparing two assets of similar class, such as stocks, a metric that is common is used. For many, it is market capitalization.
When it comes to crypto, this applies to everything but stablesoins. We talk market cap in that but we are really referring to distribution since they are pegged to $1.
In this article I will go through why the per unit price flipping means nothing.
The Flipping Of LEO/HIVE And Why It Doesn't Matter
Nothing like comparing apples to oranges and making a big deal about it.
There could come a time when the token price of LEO surpasses HIVE. When that time comes, we will see foolish posts talking how Leo surpassed it. Again, this is nonsense.
Leo has a cap of 30 million tokens. Hive is over 400 million. That is like comparing a stock with 1 billion shares outstanding with one that has 150 million. Which do you think will have a higher stock price?
If the companies are remotely close in market cap, it will be the lower issued one.
Naturally, the obvious component is market cap. Higher issued assets will tend to have a lower per unit price.
We can find many stocks that have a higher price than the $213 that Apple commands. However, there are only a couple which exceed the $3.1 trillion market cap.
Therefore, it does not matter if LEO flips the price of HIVE.
The Flippening
When we look at the Bitcoin/Ethereum situation, is anyone talking about ETH having a higher price than BTC? One is at $4K, the other $120K. Are people saying that Ethereum will top Bitcoin with this metric?
Not even the most optimistic ETH person is calling for this. The number of coins available is 6 times that of Bitcoin. Hence, just to be even, BTC will be 6x that on a per coin basis.
It all boils down to the total value of an entity. Since we are dealing with market driven pricing, the capitalization from there is all that matters.
How is this determined?
Simply take the per unit price and multiply it by the number of units. If we reverse it, the per unit price is determined by market cap divided by the units.
Therefore, the higher market cap is the main variable of value. Once we have the MC, more units will equate to a lower price (per unit).
At the present market cap, the price of HIVE, at 30 million tokens, would be about $4. That is a huge difference from 24 cents.
Leo having a total market cap of near $120 million would be a big statement. That would be an accomplishment showing the building of value of the ecosystem. Focusing upon the per token price is just noise when making a comparison.
It truly is apples to oranges.
Posted Using INLEO
Even if Leo were able to get a larger market cap, would it matter?
Only to the people holding it.
This is so true. A token’s price alone doesn’t mean much without looking at the total supply. The price of LEO passing HIVE doesn’t mean it’s more valuable, market cap is what really shows the bigger picture. But I think most people don't see it from that angle.
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A nice, sober take on the prices. Indeed if you take into account the number issued tokens then it makes sense that LEO will surpass HIVE in the future and price is not a fair comparison of their performance.
Price is nice. Market Capitalization is better. Of course with $LEO MC is dependent solely on price now since total supply is fixed. 😜
Let's shift our focus from price comparison and look at how the entire scenario adds to the growth of this ecosystem in the long run. In house fight will solve nothing
I think one of the things I have noticed so far is there are sometimes the value of Leo will go up and hive will go down but most of the time, it is always hive influencing Leo
This may be true as far as valuing a company/entity/protocol/etc. But at the end of the day, price does matter. I would rather have the market cap on the asset I own go up based on price, than on it issuing more shares/tokens. Comparing LEO to HIVE is indeed an apples to oranges scenario. The values of the two protocols are based on completely different things. HIVE is an L1 blockchain. LEO is looking to tap into L3. I'm in no way saying that one is "better" than the other. I love both and own both. But as someone who has been here for nine years, the price comparison has always been a "thing". I have swapped LEO for HIVE getting 2 or 3 HIVE for each LEO, and I have swapped HIVE for LEO, getting almost 18 LEO for 1 HIVE at the beginning of this year.
In the long run, what the underlying "company" (for lack of a better term) is doing should dictate what the price of the token ultimately does, but if I own 10 shares of NVDA at $173, and 31,454 tokens of LEO at 5.5 cents, and they both go up a dollar, which one am I going to make more money on? The most valuable company in the world? Or the fledgling crypto? Just sayin'. The risk is obviously commensurate with the potential return. I might lose 25% on NVDA if I bottom tick a sell, where with LEO, I could potentially lose it all. But there are very few people in this world buying cryptos just to own them. 99% of them are buying them thinking/hoping the price of the token goes up.
One of the "fun" measures that almost everyone here is familiar with is the price of Hive vs the price of LEO. If and when it "flips", Hive will still be worth a lot more as an entity, but my LEO bags will be worth a LOT more than my HIVE bags. :-)