Bitcoin Forum

I've heard a trader say that he uses market cap in relation with the current price, to easily determine where the high or low of the market is – allowing you to plan ahead when placing your trades.

How do you do this?
Any idea?

JH

Market cap = price x money supply

You must have misunderstood the trader.

Marketcap is the most misleading term in crypto. With this highly volatile market, marketcap does not give you the truth about the real value of the market, or of your interest cryptocurrency. Especially if you are in a period with so many scam projects. When prices of those scam coins or tokens (with high total supplies too) added to total market cap. The temporary total values of market cap will be inflated, but it will be decreased too fast when waves of scam projects burst.

Remember about liquidity of your interest asset too. One asset has total market cap does not mean that you can enter and exit it on market easily if its liquidity is too low.

Instead of using marketcap for price analysis i suggest you to used  TABTRADER. Base on my experience it can provide access to trades easily.


You can DOWNLOAD (https://play.google.com/store/apps/details?id=com.tabtrader.android) here for instance.

Yes, but how can you use Market Cap in Relation to current price to give you information about Highs and Lows?

I think an experienced trader will know something about this.

JH

Your question is not transparent to be answered. Market cap doesn't indicate anything other than having a rank. You can get some information from volume. What did you mean by highs and lows? Price increase and decrease?

I'm not sure, but I heard a trader mention a way to use Market Cap to work out highs and lows.

Not exactly sure what he meant by that but was checking to see if anyone is aware of how the cap can relate to highs and lows.

JH

What is market capitalization?
It is a measure of the worth of a company, stock or a currency (like Bitcoin). It can be called the market value.
Mathematically, it is the product of a share price and the number of shares.
Over 18 million bitcoins has been mined so far, so it's market cap, would be that sum multiplied by the fiat value of Bitcoin at that time.

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This parameter should be useful in checking the worth of one investment over another.
You should note that the value can give a wrong impression of the actual worth of a currency.
For example; if an altcoin which was just launched has 1 million coins in circulation, and fakes a couple of orders, so it appears to be selling at a market value of 1 dollar; it's market cap would be $1 million which is far from the true worth of that currency.

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So it's not a reliable way to compare various currencies, and absolutely cannot be used to judge the next high and lows of a particular currency.
It's dependent on two factors as I said above: the supply and market price. The market price is relatively constant, so the main variable is the market price.
If it's dependent on the market price, it cannot reliably be used to check for future prices.

i think that user's want to say if you are looking for pass graph of the coins. It will only help to see price of the coins before and you can decide whether to buy that coins if you are in goodtiming buying it or you need to wait a little more longer before buying.
Maybe hes not talking about all marketcap of the coins  but the monitoring webiste like coinmarketcap.

I know what the market cap formula is and I know how 99% of people use that data, so that info is irrelevant to me.

I'm trying to find out the relationship between the market cap and high/lows, whether it be high/low of the past or high/low currently or high/low of the future.

No website discusses this and most traders probably wont know this because it's not what market cap is usually used for.

So I'm trying to find out from some smart thinkers how market cap can be used to give some idea of highs and lows of an asset.

Appreciate the help,

JH

Better look at the volume rather than the market cap because there are some dead tokens still have pretty good market cap value just because it got listed on some shit exchanges with no real trading volume.

Ok, how would you use volume to give you an indication of current or future highs and lows?

JH

I have read your two previous topics. Both criteria (Market Cap & volume) are easy to manipulate, so they are misleading indicators. As some are falsified it to make them cryptocurrency above ranking "because they control one aspect of the equation (Market cap = price x supply" they can bump it.")"

If you want to know which currencies are better, stay away from economic indicators and follow the following: Currency development, its features, code update, the number of developers, the number of platforms that host that currency, price differences between them, price change for long periods.

Each person has his own way of analyzing the market and making money. This is also a way to make big short or big long shots. But for bitcoin, I'm afraid this analysis is inaccurate. The demand for bitcoin in this market is very chaotic and the small fish are often heavily fomo resulting in manipulation. so the analysis of market limits will be difficult to correct and choose a good time to enter the order. so I don't encourage you to learn this way.

Right now, regardless of how wrong it may seem to all traders, I'm looking to see how it relates to each other and how you can use Market Cap to give you information about highs and lows.


Does anyone know how it can relate?

JH

That ranking system used by CMC and Coingecko is misleading to a lot of people, as from a lot of posts I've read they seem to think it ranks cryptocurrencies from best to worst--and that's absolutely not the case.  Any shitcoin with a reasonably high value and a crapload of coins in circulation can make it up the ranks when you're just looking at market cap.  Ripple is a garbage coin in my opinion, but it's one of the top-ranked ones. 

Anyway, OP, the only information you can get from market cap is how much it would cost to theoretically buy up all the supply of a given coin.  I don't tend to pay attention to CMC rankings, and I don't think there's anything useful for traders by doing so.

Similar to the comments made already, coinmarketcap doesn't give you the true information for when to expect low/high but it does however give the user a slight indication about the supply and demand, and that in turn can be used to speculate the buying power. Though, this is not accurate and all you get is a mere speculation so traders don't often use this.

No, CMC doesnt work like that, yes you can check out prices but come to think that those are just average price of all the exchange price on a particular coin.So it wont really be a precise thing for you to consider or rely on.

When you do trade then always stick out to those price tickers or candles on where you are trading but if you are a type of trading or investor that do only buy and hold for long term then this one wont really be that much as an issue but if you do make active or day trades then its a different matter.

Something like this, some traders more focus on price for analyzing the chart, but the market cap can still important in some point; as what @odolvlobo said "Market cap = price x money supply", we can use the market cap for more likely analyzing long term or higher time frames in charts.
With market cap also, we can also identify if the price of a particular coin was increasing or decreasing, if market cap is decreasing, probably the price or supply is decreasing also (based on the formula above) and vice versa when price or market cap is increasing.
So, in short,  for a trader like me;  Price really matters.

Using market cap can be the way to see high and low of the market, but I prefer to take a look at the market directly, but you only see the price without seeing the movements. Well, I mean, you don't see how the price move, and I think you need more than that to analyze the high and low of the market, and I think you can find it by watching the market itself. I don't too often to check coinmarketcap, but I choose to watch on the market.

I guess your formula is partially correct but it has to be

Market cap = price x Number of Coins in circulation

This is in case of crypto currencies. Moreover, even if you have to calculate it for a company value then it has to be prices x shares of company in the market.

What do you mean by money supply exactly ?

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@OP so it is anyway clear that market cap is actually driven by the change in prices or circulating supply of the respective coins.