5 indicators a holder should keep an eye on

Even the top 20 cryptocurrencies have changed: promising crypto projects have come to the forefront, while some "mastodons" have significantly lost their positions. In addition to general indicators that reflect the general state of the crypto market, such as the fear and greed index or the level of bitcoin dominance, there are also individual metrics for each project — these will be discussed in this article.

Dynamics of the leading market indicators

Each asset has separate market metrics that reflect its current dynamics, based on which investors assess the demand for a particular token. Key market metrics include:

• The native token rate of the project (if any);
• Market capitalization;
• Trading volume;
• Liquidity, namely the amount of blocked assets (TVL) in the DeFi protocol, measures the health of a blockchain platform or decentralized application (DApp).

These indicators are generally closely related to each other. For example, when the price falls, the market capitalization of the asset and TVL decrease, as does the trading volume. However, the latter indicator can grow even when the price drops, as cryptocurrency sales increase.

1. Price and market capitalization (Market Cap) of a token

The first indicator — market capitalization — directly relates to the cryptocurrency's exchange rate. Market capitalization is calculated by multiplying the current value by the number of tokens circulating on the market.

When estimating market capitalization and predicting the value of the cryptocurrency rate, it is essential to keep an eye on one more key indicator — the schedule of unlocks with the help of services like Token Unlocks.

Only a small fraction of the total number of tokens can circulate on the market. As new tokens are unlocked, the price of the cryptocurrency may come under additional pressure, leading to its decline.

Using CoinMarketCap or CoinGecko, you can find information about the current (Circulating Supply), total (Total Supply), and maximum (Max Supply) supply of tokens. These services also display fully diluted value (FDV), which is the market capitalization if all cryptocurrency units are released to the market at the current exchange rate.

2. Trading volume

This is an important indicator, as it affects volatility, i.e., the rate of change in the exchange rate of a digital asset. In addition, a large trading volume indicates a high demand for an asset, especially if the asset's price increases as the indicator grows.

When analyzing the trading volume, you should also consider the ratio of this indicator to the market capitalization. Some cryptocurrencies have a higher trading volume than assets with a higher market capitalization.

For example, although Bitcoin is the most capitalized asset in the crypto market, the most significant trading volume belongs to the USDT stablecoin, the most sought-after cryptocurrency.

Also, for example, XRP's (XRP) market capitalization is $50 billion larger than Solana's (SOL), but the latter surpasses the former in trading volume — $3.5 billion vs. $2.9 billion. This indicates that the Solana ecosystem is highly sought after at the moment, mainly due to the high demand for meme tokens and the popularity of the Pump.fun platform.

3. Total blockchain value (TVL)

If a token has its own blockchain or decentralized application, such as the DEX exchange and credit protocol, it is also possible to track the TVL dynamics. The more tokens are locked in protocols, the fewer they circulate in the market, limiting the supply.

However, it is important to take into account that if a large number of tokens are withdrawn from liquidity, for example, in the case of a DeFi protocol hack, with subsequent sale on the market, the crypto asset rate can fall sharply.

TVL projects and their dynamics can be tracked using specialized services such as DeFi Llama. If the protocol's total blocked value grows over a long period of time, it indicates a growing demand among investors interested in long-term asset storage.

4. Networking and social activity

Services like Token Terminal and CoinMarketCap reflect data on the number of active users and holders of Web projects over different periods of time. The number of active users can help you understand how high or low the demand for a crypto project is.

Social media activity also reflects how much attention the project is getting. There are special assessments of the activity of the accounts of the projects themselves, such as Twitter Score: the higher the index, the more active the project.

Activity scores are significant for Tier 1 blockchains such as Bitcoin, Ethereum, BNB Smart Chain, and Solana, as their native tokens are used to pay transaction fees.

5. P/S ratio

Price-to-sales ("price to revenue") or P/S is a ratio similar to P/E (Price/Earnings or "price/profit"), which compares the capitalization of a crypto asset to the project's revenues. The lower this ratio is, the better, as it can signal the asset's imminent growth.

The P/S ratio is calculated by dividing a project's market capitalization by its annual revenue.

However, this figure applies only to projects that generate revenue, such as decentralized exchanges, lending protocols, or NFT marketplaces. In addition, you should not rely on this indicator alone, as it may be biased: DeFi protocols may manipulate P/S by paying commissions themselves to increase the attractiveness of their assets.

This indicator, as well as P/E, which is also applicable to crypto projects, can be found with the help of the DeFi Llama analytical service and custom dashboards on the Dune Analytics website (you can also create a dashboard yourself for projects of interest to investors).