How are prices and market caps of new projects decided?
How are prices and market caps of new projects decided?
I’ll start off by saying that I don’t want to name a specific project that I have questions about. I might be misunderstanding this completely so I’ll avoid creating a witch hunt.
So there’s this new project and they’re rolling out their newly dropped token. When I check several sources, there is an indication of max supply but no indication of circulating supply. The top 5 wallets own around 97% of the total supply at the moment. Yet this token is priced at almost $3 which would put their market cap on almost $3 billion while they released a couple of days ago. How does this work? Where does this value come from? Isn’t it reasonable to assume that all projects start at $0 and they can gain value by people simply buying the tokens?
To me, it all seems extremely sketchy but it’s also the first time I’m following a rollout from the start. Can anyone explain/clarify how something like this happens? It would be much appreciated. Thanks in advance!
They are not “decided” they settle at an equilibrium between supply and demand. If creators launch it at a price with a bigger market cap than it deserves it will dump (which seems like the situation with the token you are talking about) and if it launches as undervalued in will pump. A fair initial market cap would be the money people put in the presale for example, a price at which presale buyers are even or in small profits.