Bitcoin Forum

I have probably said this at least a hundred times and since these days people keep repeating bitcoin share of market cap I though to make this topic, finally!

Market capitalization (market cap) is the market value at a point in time of the shares outstanding of a publicly traded company, being equal to the share price at that point of time times the number of shares outstanding.
in cryptocurrency world the "shares" are the number of available coins". and to put simply market cap is calculated by a very simple multiplication of "available coins and price.

Market capitalization, by itself, is NOT a measurement of the value of entity

A company set up to run a business will usually have money (and perhaps other assets) put into it by the shareholders in return for an allotment of shares.
a cryptocurrency however can have as many "shares" or "number of available coins" as it wants. because to put simply, it is code and you can put any number you want as the block reward, the initial block reward, the premine, and a whole lot of other methods! and you don't have to worry about taxation and other legal matters than a company faces when they issue a share.

here is how Market capitalization is a bad factor of comparison. (to those who said bitcoin has X% of market cap now):
I can start a new coin today and set the maximum number of coins to a big number, premine the coin to hold a large portion of it myself, add some "interesting features", advertise the coin by spending some money and release it.
lets say I pump the coin to 50K satoshi (it is easily done every day in the altcoin market) in which case I only need about 32 billion coins available to surpass bitcoin's market cap.
now lets assume I have a lot of money and am a good and experienced pumper and can actually pump my coin up to 0.01BTC in which case I would only need 1.6 billion coins to surpass bitcoin's market cap. and so on.

now is my coin really worth more than bitcoin? (see the example in this comment (https://bitcointalk.org/index.php?topic=1842964.msg18864647#msg18864647))

it is worth adding that currently there are 2 coins with 180 and 100 billion "supply" with 2 digits satoshi price. and a total of 12 coins with above billion available supply prices ranging from a couple of satoshis to 21K satoshi and they get pumped so price can go much higher.


finally with altcoin supply two things happen:
1) these available coins are really available to everyone and if it is not well thought and is really big it will crash the price.
as an example I can name Dogecoin. in this case the massive sell pressure (big supply versus a small demand) will crash the price and will always keep it down.

2) these available coins aren't really available. here is where all the manipulations come in. methods like pre-mining the altcoin, things like ICO and so many other ways of taking control of the supply so that the real (available) supply is far less than lists such as https://coinmarketcap.com show.
as an example I can name ethereum with its (apparently) no max limit coin which currently has 90 million coins available. but is it all really available?

I moved this to Economics board since it is more appropriate to the subject and also because the main board is filled with drama spam.

nobody listens man!
they only see numbers without seeing the meaning behind them. they just look at a > b and how b is growing. they don't understand why b is growing and apparently don't want to understand it either.

and you are right this is how Ethereum pumps every time and now that the trick is out i am expecting lots of other altcoins to pull the same manipulation.

Even though the market cap of any coin isn't true representation of value, it seems a good place to start when analysing a coin. Sooner than later, coins with high supply will bow to reducing price if they can't get enough users to mop up supply

I can't say that I particularly disagree with you

In fact, I have been always telling myself that market cap is utterly misleading. That said, I still have to add that you are obviously looking at only one side of the coin. Basically, what you tell is true, but it is only one half of the whole truth while the whole truth is that what you say can be equally applied to Bitcoin as well. We don't know how many bitcoins are actually circulated. But we know that 1M bitcoins are sitting idly in Satoshi's wallets, so you can safely discard them. Quite a few coins have been lost for good during all these years, and you should discard them too. Apart from that, there are a few whales who said that they are not going to sell their stashes no matter what. All this can heavily limit the number of coins actively used or traded to a rather low number, low enough to make you claims unreliable

Market cap is definitely misleading but when people use it to recognise the rising trends of altcoins, that's perfectly reasonable.  There aren't many better ways to suggest what the value of a coin is because it's very hard to measure how much is actually in circulation.

What you have shared is real and is really happening in the cryptomarket. But investors and economic players are not dumb enough not to notice such things. If I were a developer I could easily do that if I have a capital but the goal of the coin owner is profit. If I were to do that big whales will notice my schemes and nobody will no longer buy my coins. Even if the developer or the coin owner can increase immediately its status in the coinmarket cap but he have also to make sure that people will patronize his coins.

I think it's a genuinely pathetic and shit metric, but it's hard to know what might replace it for simple reference. Perhaps some balance of trading volume vs supply but that still wouldn't be soundbitey enough for most people.

Yes, the market cap doesnot reveal the true market value of the coin.Its highly manipulated and its very common in altcoins.Any one can launch a coin announcing as premined and if he places a buy order at high value,then its market cap is calculated by multiplying that value with number of coins available.So,its useless to consider marketcap in altcoins.

It is useless even with Bitcoin

The whole idea of market cap is meaningless itself since we don't know how many coins are actually traded, how many of them are used for facilitating the exchange of goods (i.e. as a currency), how many are lost or stashed away for years. It is like measuring the average body temperature across the hospital, you can calculate but it is as useless as it is misguiding, and still more so if count in the patients of the morgue unit. The latter refers to many billions if not trillions of left for dead altcoins that bag holders are still desperately trying to sell at however low prices in wretched places like Yobit

but it can not be applied to bitcoin! because simply bitcoin has been open to everyone from day 1. apart from genesis block you could mine any block that you wanted up until today. this however in altcoins which use marketcap manipulation is not true. you see a coin with 80 million coins then investigate and see 72 million coins have never been released to public for sure.

and that 1M coins of satoshi is a rough estimate and even if it is true, my point still stands. bitcoin was open to anyone who wanted to mine it from the fist generated coins.

and any bitcoin whales means they have bought it like the rest of us on equal grounds and that is a big difference in my opinion.


you can use daily volume and how it has changed!
if it is changed in the past few days, it is a pump. if has gradually gone up with price over a long period of time it is realistic investment.
add to that the real world usage such as adoption as a "currency" then you have yourself some factors to measure.

The effect is the same regardless whether whales bought their bitcoins or not, whether Satoshi's coins are public or not

And the effect is that with Bitcoin the market cap is as irrelevant (well, mostly) as it is with any other altcoin out there. The reason for such conclusion is pretty simple and rather obvious. Only a small (if not tiny) part of all bitcoins gets traded or used as a means of payment, while the majority of coins are either stashed away or lost for good. In other words, if the reverse were true (i.e. most coins were circulating), the Bitcoin price (read its market cap) would be very different from what it is now. The bottom line is that Bitcoin market cap is as misleading as those of any other cryptocurrency

Got to agree market cap is misleading and that bitcoin's is as misleading as that of alts but this isn't to say it has no value. Of course it is still one of the points of information that can be used to help you determine a number of things with crypto. Pay little attention to how coins are touted by their market cap, but don't pay no attention.

That's the problem. Market cap is a very oversimplified metric, but it's the best that is easy to calculate and understand. But with trade volume, we would have the same problem - a high value here can also indicate that a particular good/cryptocurrency is just used for speculation but nothing more.

A more complete evaluation of the potential of different cryptocurrencies is what the people at Coingecko (https://www.coingecko.com) tried, but it has its flaws, too; because for example the different coins have different development strategies. So the Coingecko value can be distorted by some minor metrics. It's still a very good complement to market cap if you want to evaluate a particular coin.

An alternative approach I would like to see realized would be the trading volume to goods and services instead of the trading volume to fiat currencies and cryptocurrencies. For example, one could try to aggregate the information of Bitpay-like payment processors (with CoinPayments in the case of altcoins), OpenBazaar-like decentralized markets and centralized e-commerce sites. That would indicate if a cryptocurrency is really used. And here, I think, Bitcoin would beat all competitors by a very high margin (I wouldn't be surprised if it's over 90 percent).

I guess you still wouldn't be able to get reliable data

Obviously, there are quite a few off-chain transactions which cannot possibly be tracked and taken into account. I've heard that some merchants are accepting only off-chain transactions, for example, from one Coinbase wallet to another such wallet. These transfers are instant and don't require any fees, so their advantage is evident to both buyers and sellers. Though I agree that such info could be very useful in calculating the real value of Bitcoin, i.e. its value as a currency completely stripped of its speculative utility

all of these factors, when considered individually, are bad and will even give the wrong idea in some cases. but when you have them all in your analysis then you can come up with a better conclusion.
- market cap
- trade volume and its change over time, for example is it temporary rise or has been up all year.
- price
- transaction number and volume
- services, merchants,...

Coin market cap is not misleading but you will have a false interpretation if you doesnt have a knowledge on how does it work. For example the price of bitcoin multiplied by the total number of coins in circulation would be the market cap but do you think that your coin will last long in the top 10 of the cryptomarket cap list if its only the developer that is feeding the price. It will be a waste of bitcoin since no one is buying your coins. Bitcoins, ripple, ethereum have stayed in the top three since the buyers and sellers moves its price until finally it reached that far and sustained it for very long.

Personally, I'm confused by your post

For me, it is not clear how you actually substantiate your claim that market cap is of any use and that it is not misleading. As I got it, you essentially confirm that market cap is mostly a useless metric. Basically, you yourself say that a coin won't stay long in the top 10 coins by market cap if it is only kept there by its developer pouring his money into it. Care to explain what you meant to say and what does it have to do with invalid interpretation of market cap (as you insist)?

I know right :D if right now you start to buy up every bitcoins available and are offered by traders, called accumulating as well, if current price is $1000 after successfully buying 20K bitcoins with a fixed $1000 per coin then you'll see how fast traders/sellers/holders increase their price which they're willing to sell, long story short if you try to accumulate half a million bitcoins in less than a month you'll end up with a $1150-$1250 averagely.

And from there every 100K coins you try to buy off from the community you can effectively pump the price starting from $1250 up to $1750 and before you could accumulate 1M BTC the price already reached $2500.

However right now only about 2K bitcoins are being mined but the trading volume is more than 150K, yes I know some of it are fake volume and most of it day traders changing hands but someone is slowly accumulating coins in bulks but very slowly to avoid pumping the price and pay more money.

Because if you try to buy 5M bitcoins in matter of a week the price will shoot up to $50,000 per coin, sorry to tell you that if you think $18B marketcap for BTC is not real I've got to tell you that it's true marketcap is way above $500B.

Some people are too greedy with short term visions when it comes to trading their coins no one really should sell under $2000 now they don't get it maybe they're stupid or something, we only have access to roughly 2K bitcoins daily and I won't continue because I don't want to give away such opportunity for free :D but those with a bit of brain know what I'm talking about.

This is where your train of thought becomes especially shaky

And it is most shaky where you take it as granted or just outright postulate it that someone (or a group of someones) is set to slowly accumulate coins in massive amounts over time. I guess you should provide some evidence it is really so. You should understand that it doesn't in fact matter how slowly you accumulate your stash, there will still be no more coins than there are in the market (i.e. they won't appear out of nowhere). And if you take some amount from somewhere, this amount will be subtracted from there. In other words, you will still eventually get the price increase not particularly different from what you would get if you bought the same amount fast. Other than that, I could just as easily claim than someone (say, the Winklevii) may be slowly selling out their bitcoins. This is as indefensible and indemonstrable as your own assumption (that someone is slowly buying up coins)

in a market like bitcoin it doesn't matter what one person or couple of them do. it is the total that matters. there is 16.5 million coins available (ignoring the lose ones) and there are millions of people accumulating from 0.01BTC or less to 1000sBTC and the total of all these "supply and demand" has already created a market for 8 years and we can see how the price has changed over the years with the change in this "supply and demand".

nobody said $X marketcap is not real, the topic is that marketcap is not a good factor to compare cryptocurrencies with each other or with other things.

that is not called being greedy it is called being a day-trader as long as you buy the dips and sell the highs or in reverse to accumulate more bitcoin (sell the high and buy the dip).

Hi guys, Bobby here from CoinGecko (https://www.coingecko.com). Interesting discussions here that you guys are having. I strongly agree that market cap is not the sole way to measure altcoins. There needs to be many other ways to look at these cryptocurrencies and that's what we attempted to do. Always looking for ways to improve things so yea do let us know if you have any. At the moment we take into account market cap, trading volume, development, community and public interest in evaluating cryptocurrencies and although it's not perfect, it does create a sort of alternative rank for consideration when trading any altcoins.

I'd rather say that it won't be real altogether

Market cap, as it is calculated, assumes that it reflects the price of all coins issued (since mathematically, it is a product of multiplication of all coins issued by the price of just one coin). But it should be pretty obvious that economically it is meaningless, since we can't possibly claim that the price of only a part of total amount that gets traded should necessarily reflect the price which would result if all coins were traded. Basic economics clearly states that the more coins enter the market (i.e. the higher the supply), the lower will be the price. Hence, the market cap calculated on the price of only a part of all coins (and minor part at that) is meaningless if not outright deceiving. I don't really see how this point can be challenged in any plausible way

yeah, I have seen your website before and I have to say it is so much better than coinmarketcap in many aspects.
I specifically like the Developers and Community columns.
also I would suggest that in liquidity column, it is best if the average trading volume in longer period such as a week or better in a month is considered instead of only past 24 hours. coins that are being pumped or dumped will always have a huge volume that is also temporary. but in long term it will be more realistic.

also I would suggest Number of transactions (again on average per long term) and also number of services in real world that are accepting these as real currency (this last one is going to be hard though).

as I said in my example in OP an altcoin can easily create coins out of nowhere! there is nothing stopping them and it is just supply and doesn't even have to be on the market to change anything such as creating sell pressure.

here is very good example of why Market capitalization is not such a good factor for comparing cryptocurrencies when it comes to altcoins like this. when a coin like this can easily reach the third rank with a simple pump to 14000 satoshi!
https://i.imgur.com/0X8x7FR.jpg

source: https://bitcointalk.org/index.php?topic=1780445.0

The oldest coin to survive purely on marketcap figures is Ripples xrp token. Most of the "circulating Supply" is not freely available to trade as the free gifted tokens to banks or partners are locked by contractual agreement.

Can someone explain how the circulating supply decreases from time to time? WTF
(Now 18 June 2017 "available" 38,290,271,363 XRP )
https://i.imgur.com/WE8HJvj.jpg

I had to lol at this.  People just want to crank out the bullshit as hard and fast as they can..and you end up with gems like this statement.   I agree with OP and I think most users here are financially illiterate.   Not all, but many.  And people parrot the phrases they hear, like all the TA garbage.  It's sickening.

Any dev can create a new coin and pump the hell out of it to reach the higher tier of market cap. It is never a good thing to base a coin of how good it is by just looking at market cap. Numbers matter, yes,  but numbers alone don't define a coin's true value. If I know how to create a coin right now, I can artificially increase its value for a short time and see it hanging in coinmarketcap.com even though it's a complete bs coin.

The premined coins that list a ton of coins at the same time get on the marketcap webpage on top of other better coins and it's unfortunate to see how newbies think they are better coins when they have no real value proposition at all, more smoke and mirrors while smaller teams struggle to keep in the first page because the didn't raise millions on ICOs and whatnot.

what you call surviving is not really surviving, it is more of just existing like how all the rest of the altcoins have been doing. even coins like Bunnycoin that is worth less than 1 satoshi LOL. also this chart is only worth if you add the price on top of it. price that was 1400 satoshi last June and went down to 400 satoshi, and again like all the other altcoins it was pumped up to 24K

and what you just said is my whole point. the circulating supply is not even 1/100 of what we see!

I think they said multiple times that they will "lock" some part of the supply in escrow or something, or maybe some of these dips are from burnt coins or something. but I am not sure.

Here is the whole ugly XRP scene. In August 2014 when 1/5 of total xrp became "available" neither price or volume changed. The whole point of it was to move up Marketcap, which still is totally fake.
Price is a Number Ripple chooses to dump on ill-informed.
Imagine releasing over 4 million Bitcoin on a single day.

https://i.imgur.com/Ax1cU9C.jpg

I have also been seeing how people have been misunderstood market capitalization of an assets especially crytocurrency like Ethereum and even the great bitcoin! What I was tough in economic class was market capitalization is the values of asset supply multiplied it currently market prices.