Bitcoin Forum

Why is it that when people compare coins, they bring up what the "market cap" would have to be in order to project a price? Why does this matter, if it's just coin price x number of coins?

Why would one coin not be able to achieve a particular market cap?

Market cap is a measure of adoption that is comparable across all currencies.

Marketcap is a marketing trick. Some coins  on coinmarketcap.com ain't what they appear to be. If i create an altcoin myself, premine it %99 and sell only 1 share for 500k$, its market cap instantly becomes 500k$xMy coin's supply.

Coinmarketcap is not stupid and eliminates those scams but some coin owners are actually smarter than anybody and can hide their real value by using more complicated variations of this method.

That's mostly useless metric

You feel as if it is telling you something but it isn't. It is a sort of optical illusion which makes you believe in something which is not really there. And it becomes particularly misleading and deceiving when people start drawing conclusions on its basis. For example, when Bitcoin recently flash crashed to below 2,000 dollars per coin, its market cap diminished by 4B dollars, and some people here seriously believed that these monies were real, as if literally 4 billion dollars had been withdrawn from Bitcoin. This example shows it pretty unambiguously how fake is this metric

It's not fake or useless, you just need to understand how to relate it.
obviously you can't base your investment on that parameter alone, but you can use it with others.
with new coins and small amounts it might be misleading,
but when going to big numbers over serious amount of time it is much more transparent.

People use it because it's easy to game and inflate and it supplies large numbers that make you look cool.

Other than that it's misleading junk that's best forgotten about.

in fact, if the market cap can't be determined as an important factor to compare the coin against another coin.

Try to take a look on the gnosis and his market cap is ridiculous in my opinion. The marketcap full with manipulation.

It's not good in my opinion.

Okay, now you may want to tell me how it is useful

If it is not useless, according to you, then it should be useful, right? Unless you mean being useful in confusing or astonishing someone with 40B dollar Bitcoin market cap, of course. It is useless even if you compare market caps of different currencies since this is certainly not the case when two useless things may turn somehow useful if combined. In fact, such comparisons would only produce twice as useless (or useless squared) results

I agree with mindtrust.  Market Cap is there to create illusion about the market size of a coin.  It is flawed representation that does not tell the actual market capitalization of a coin.  It just get the present price of a coin and then multiply it to the total coins then declaring the Market cap.  I agree with deisik that it is useless since it does not tell us the accurate market capitalization of a certain subject.

The market capitalization of the company consists of cost of hardware products and so on. the Market capitalization of the currency, then temporary factor which does not mean anything. Tomorrow, the currency will lose credibility and market capitalization for a few days will be zero.

I had a vague feeling that it was basically smoke and jargon, but as a newb I couldn't just go around accusing people of just saying buzzwords.
So yea, to people who think it is useful, please explain how

Yes,  you are right. In case of cryptocurrencies, market cap simply implies present price x total coins in supply. So it is just estimated figure and doesn't belongs to positive economics just normative one. As all coins in market are not bought and sold at that price.
But in real world, market cap is very important word and refers to value of total assets owned by company.

The higher is market cap - the stronger the coin. Coins with small market caps are easy to manipulate.

Actually marketcap could say something useful only if coin wasn't pre-mined (most of coins holded by tiny group of people) or
like Ripple was't just created (with a bit sharing with bitcointalk users).
If most of the coins are not used anywhere, and only a small part of it is traded at an (arbitrarily) attractive price -
the value of market capitalization is not indicative and could only confuses people.

It is a predictor of usage utility and future value, not to say that bubbles can't happen at any time but as a whole it is usually a good sign and measures the health of the ecosystem as a whole, recently the value of all altcoins measured on coinmarket cap passed 100 Billion dollars and is now 102 Billion dollars so a market cap based on the sphere gives context to the wealth creation that exists in the market.

How's that really?

And why only 100 billion and not 500 billion, given the "context to the wealth creation that exists in the market"? If Bitcoin market cap has, say, 40B dollars while only around 1M coins get actively traded today, do you really expect it to rise (i.e. price to rise) if all of them start being traded or circulated since that's basically what market cap assumes (i.e. that all coins are circulating)? I guess if supply of coins increases just 2 times (from 1M to measly 2M coins), the price (and consequently, market cap) might easily crash even more than 2 times (e.g. due to panic selloffs). Now think if it is in fact "a predictor of usage utility and future value". The number of coins can be loosely considered that, but you can't possibly predict what their average price would be

Market capitalization is a one good factor about the coin. If there it has a bigger value,the percentage in 24 hours etc, we will have an idea whats  happening in a coin.Bigger trader volume also means more people are trading or some whales are manipulating it. :) It gives as an idea about market acceptance also IMHO.

Market cap function to see the development of coin at a time. What percentage of coins are in the hands of buyers and dev. It is important to examine when the coin rises and falls.
This is just an insignificant analysis and I am still learning. :D

Marketcap helps to compare how much fiat was invested in some coin. Although you shouldn't think that if Bitcoins marketcap is 46 billions USD, then people literally exchanged 46 billions USD for all the Bitcoins. It only means that Bitcoins were exchanged for more fiat than other coins.

Although marketcap is an indication of the total value of a crypto you still have to look at other factors. Try averaging the daily trade volume. The higher it is the more likely it is that people are invested in that coin for the long run. Look at coinmarketcap.com. Besides for the day traders (pumping and dumping coins) the top coins always have the biggest trade volume. It's an obvious indicator but shouldn't be overlooked.

There is a major flaw in the current methodology for market capitalization calculation for the crypto-currencies. The issue is that the lost coins are not excluded while doing the calculation. As a result, the market cap is artificially inflated. According to some estimates, there are at least 1 million BTCs, which are "lost" for ever. By lost coins, I mean coins for which the private keys are not available with anyone.

This is certainly not a major flaw

A genuine major flaw of market cap is that it tricks users into thinking that all coins are traded or circulated (i.e. used for real trade as in buying things with Bitcoin) while the price of Bitcoin (or any other cryprocurrency) is in fact determined only by the actual supply of coins to the market. It means that coins that are stashed away are as inconsequential as coins lost for good (i.e. all stashed coins should be excluded from consideration). Strictly speaking, this is not quite so but if they make a successful "comeback" that would evidently drive the price (and thus market cap) down

It does matter because there is no way to measure how many people are in any coin, you cannot use the number of wallets or anything for that matter to determine that number, so the best we have is the market cap, a coin with an higher market cap will have more people using the coin than one with a lower market cap, so the market cap is an indirect way to see the adoption of a coin.

As to me, that's sheer nonsense

Just because we don't have a reliable metric (apart from price itself), market cap doesn't become any better in and of itself. As told many times already, it is not just unreliable, it is outright deceiving and tricking people into making false conclusions like Bitcoin losing competition to altcoins since its market share is purportedly diminishing. It can in fact be expanding in terms of how much money actually gets poured into it (the real metric), but just because some tiny share of some altcoin rises a few times in value (which doesn't require huge amount of fiat), it looks as if Bitcoin market share were shrinking. I repeat it again, market cap is not just unreliable, it is openly deceptive and misleading

To find the value and progress of a coin,people use the website coinmarketcap.A crypto coin's market is calculated by multiplying the total number of coins available with the current market price of that coin.Well this method mostly misleads us instead of giving us the correct detail.The problem arises when most of coins mentioned are not at all available for trade.It occurs mainly in premined coins.We could take the example of Aurora coin.It was said that its market cap was over $1 billion.But the actual number of coins available was counted and it was found that its marketcap was found to be only $10 million.Other examples are Ripple and Steem.So its not an efficient way to find the progress of a coin.

That's why all claims that Bitcoin market share is declining are either misconceptions and delusions at best or outright lies (fear, uncertainty, doubt) at worst. If Bitcoin rose 50%, say, from 2,000 dollars to 3,000 dollars per coin and the amount of coins traded is 1 million, this growth would require (3000-2000)x1000000 = 1 billion dollars invested in it. On the other hand, if some other coin rose 500%, say, from 1 dollar to 6 dollars, with the same amount of coins traded (i.e. 1 million coins), this growth could be achieved with just (6-1)x1000000 = 5 million dollars, which is 200 times less for 500% increase than for 50% growth in Bitcoin

This simple example shows that it is the amount of fiat invested in a certain coin which is what actually counts

Well I guess it matter to a lot of investors and traders alike as they know where the money goes. In the world of the stock market the price where the biggest volume and market cap is where the action goes, what I mean about that is the bigger the volume the bigger the chance you can have a play for you to profit on it. Market Cap is simply saying to us that here is what other people buy and sell and others must come along with it. It shows to us that the larger the market cap is the larger the market share of that cryptocurrency is in terms of investment.

How on earth would you calculate the lost coins and do you think you will take the market cap with all the available coins ,if that is the case it really not possible to calculate things like that,it is known that bitcoin has a limited amount of coins and if you think that one million coins are lost,does it mean that the market cap now is low or high,just want to hear what your thoughts are on that. :P

Marketcap i think for me i not that important when it comes to development of each coin and not important for rising of each coin,coinmarketcap is just for monitoring the stats and ranks of each cryptocurrency out now.

Market capitalization is a better comparison than price alone because some altcoins can issue more tokens than others. For example, dogecoins/bytecoin versus Byteball. Byteball is worth $600 a pop right now whilst dogecoins/bytecoins are a few cents each. Now you can't just say that byteball has achieved higher height sthan dogecoins or bytecoins simply because it's worth more. Thta doesn't work.

Market cap basically represents all the liquidity available in a market. However it's not always accurate. Coins can get pumped quickly and market cap fluctuates quickly and trades are magnified infinitely by pumps/dumps. Therefore, i believe that community and the technology that backs up the coin itself is most important.

What you say won't work either

For the reasons said and repeated numerous times already. You don't know how many dogecoins, bytecoins, byteballs, or whatever are actually circulating (traded). In this way, a coin which may have higher price with greater supply simply because more coins can be stashed and thus the effective number of coins in circulation is less in comparison with some other coin which might have have lower price with lower supply but higher circulation numbers. Or just because one coin can be a real deal while the other real trash