Posted in: Altcoin NewsArchive
March 4, 2014 2:17 PM

Auroracoin's Market Cap is Highly Inflated

Icelanders will be lining up to sell their auroracoins. Photo via Matt Shalvatis.

Many people are pointing to Auroracoin’s position at third place on as proof of this new coin’s success, but the reality is that it could be setting itself up for disaster. The coin made headlines when it surpassed Litecoin’s market cap, but Auroracoin is not actually closing in on a $1 billion market cap. In fact, the real value of all the auroracoins currently on the market could be lower than $10 million. This would still put it in the top 25, but we could see it drop even lower after the airdrop begins. Let’s take a look at some of the facts behind this cryptocurrency and whether or not it will be able to achieve long-term success.

Auroracoin’s Selling Point

The main idea behind Auroracoin is that half of the coins will be premined for all of the citizens of Iceland. If you’re an Icelandic citizen, then you’ll be able to claim your share of the Auroracoin premine during the airdrop process. This is actually a rather unique idea, and it could have implications for new premined coins in the future. Most people scoff at the idea of any coin being premined, but this coin has shown that it can still be a completely democratic process. With each Icelander gaining access to their “fair share” of the auroracoins, people will be less likely to complain about a certain group of people gaining early access to a new cryptocurrency.

The Problems with Auroracoin’s Current Value

The reason that this coin’s market cap is so overvalued right now is that is already counting the premined coins, which have not yet been released. In reality, there are roughly 100,000 auroracoins in circulation right now. At a price of $92.78 per coin, the total market cap is still under $10 million at this time. This is roughly 1/100th of the value that has been touted in various reports. By counting the coins that will eventually be handed out to Icelanders, the total market cap of Auroracoin seems to be much higher than reality.

Setting Itself Up for a Collapse?

As Icelanders gain access to their premined coins, it will be interesting to see what they do with their new found wealth. Each Icelander is supposed to get 31.8 auroracoins over the next year, which would be roughly $3000 at today’s price. When an Icelander has the choice between receiving $3000 or 31.8 auroracoins, it’s likely that they’ll decide to go with the fiat currency. Bitcoin and cryptocurrency is still a niche subject, and speculating on the value of any kind of altcoin is a highly risky proposition. Auroracoin definitely offered a new perspective on a way to fairly distribute a new cryptocurrency, but it would make sense for most Icelanders to simply take the money and run. If I were a citizen of Iceland, I would probably do one better and just exchange the auroracoins for bitcoins. This would eventually bring the coin’s market cap down to its true value, perhaps even lower.

Kyle Torpey @kyletorpey

Kyle is a freelance Bitcoin writer and the Marketing Director for Bitcloud. His work has been featured on Business Insider, VICE Motherboard, Let's Talk Bitcoin, and RT's Keiser Report . You can follow him on Twitter (@kyletorpey) or send him an email.