Why Is Auroracoin’s Market Cap So High?

Auroracoin

It’s quite easy to judge the success of a coin simply based on the coin’s market cap. When Auroracoin very quickly shot up to 3rd on CoinMarketCap, many speculators assumed the coin caught success very quickly and even began investing money into it. But how did this happen? Was investing in Auroracoin a mistake? Let’s take a look. 

To understand Auroracoin’s market cap, we first have to understand the entire idea behind Auroracoin. There are 21 million coins in total. Half of these 21 million coins were premined by the developer, leaving him with 10.5 million coins that are not even in circulation yet. These coins are to be distributed among the population of Iceland. Once this happens, the coins will actually be available for trading.

The problem with CoinMarketCap right now is that they are including the 10.5 million coins the developer has premined in the market cap, while in reality, there is really only a bit over 100,000 coins actually in circulation. This makes the true market cap of Auroracoin less than 1% of what it is right now. While one may argue that once the coins are released, the market cap would be similar to what it is wrong, that is sadly not the case. When the coins are released, we can expect many people to sell them almost instantly, especially considering the majority of people receiving the premined coins will be completely new to cryptocurrency. This will cause the price to drop drastically, pushing the market cap far below what it’s being shown as right now.

A Potential Scam?

With such a large premine, it’s very easy to question the developer’s intentions. While he certainly would not be able to sell a lot of coins at once, with a value of $40 a coin, that leaves the developer with over 420 million dollars worth of Auroracoin at this time. While speculators are monitoring his transactions closely, the potential to cash out some of his coins will always be there, and it truly is something to worry about.

Will Auroracoin be a huge success? It’s too early to tell. The only thing we know for sure is that CoinMarketCap is causing the coin to be drastically overhyped, and we’d recommend holding off investing in Auroracoin, at least until everything smooths out.

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