On market capitalization (again)

[deisik]

I doubt that it'll be possible.

There is a ton of hidden demand given the fact that a) there are a lot of hidden orders in the form of both hidden orderbook entries on exchanges and OTC bids and b) People's expectations can adjust according to price movements

But this hidden demand can be sitting there at lower prices. However, we can narrow down our quest to simply determining the liquidity of the market at its present price. And as I think, it might be possible to calculate this statistic by taking bids at or near current price across the market. Indeed, it won't be a highly accurate figure but it should be pretty close, and give us a genuine insight into the current state of the market (and its liquidity)

To me, market cap is a simple metric that is rigidly defined by a formula, price times quantity. Whether or not it's relevant to traders is one thing, but that's the way to calculate market cap as it is defined

Yeah, but it is pretty much useless (as well as misleading) if calculated according to this formula. But what's in the name?

[barbara44]

The fact is that there is coins that are dormant and not moving at all makes the calculation of "real" market cap impossible, there are so many coins (millions) that are seriously just not used at all, simply at least %10 of all bitcoins in existence will never be moved, they are totally gone.

So, when you calculate you can never actually calculate the market cap by the amount of coins mined and the current price, that is what we do because we have literally no other way to do it however reality is there is millions of coins that are gone and will never be used that we don't know the exact number of, that is the trouble here, if we knew exactly how much coins are gone fully, we could remove that from the mined total coins and simply just get the real market cap but there is no method to calculate the forever gone coin number.

[mu_enrico]

Mate, you are trying to "merge" market value and book value, so it will only add more confusion.

In Bitcoin, we don't have such thing as book value, so it is impossible to obtain a "real value" like what you have proposed below:

It should be instantly obvious that the figure thus obtained is quite misleading and utterly deceiving because if we were to sell all bitcoins for real, the price would crash into single digits, and below. And this is exactly how we can define (and calculate) a real market cap of a cryptocurrency at any given moment

Moreover, even with book value, often, a stock price could fall below its book value. Hence, it's impossible to measure "real value" accurately. We can only measure "fair value" with all the limitations.

[deisik]

Mate, you are trying to "merge" market value and book value, so it will only add more confusion.

In Bitcoin, we don't have such thing as book value, so it is impossible to obtain a "real value" like what you have proposed below:

It should be instantly obvious that the figure thus obtained is quite misleading and utterly deceiving because if we were to sell all bitcoins for real, the price would crash into single digits, and below. And this is exactly how we can define (and calculate) a real market cap of a cryptocurrency at any given moment

Moreover, even with book value, often, a stock price could fall below its book value. Hence, it's impossible to measure "real value" accurately. We can only measure "fair value" with all the limitations.

I think we should keep things simple

I mean comparison with stocks is only confusing us further and clouding our vision as well as proper perspective that we need, so we shouldn't really take them as an example. I don't know what you mean "fair value" here with respect to cryptocurrencies, but if by that you mean the value which follows from their real life use (as I can't think of anything else), then it would be a good starting point anyway. However, most cryptocurrencies don't have any real use, so their fair value is close to zero

[mu_enrico]

The stock market is much older than the crypto market, and we use terms like market cap, volume, circulating supply, etc., from it. My apologies if the audiences here haven't familiar with terms in finance; hence might make us confuse even more. In short:

- market value: current market price
- book value: price if the company's assets liquidated, minus its liabilities
- fair value (finance): a price that one thinks is fair considering his knowledge (usually influenced by book value, economic projections, etc.)

My point is since the market cap formula is, well, market price * circulating supply, you could change the market price variable with something else. However, since there is no book value in crypto, we couldn't use it as a floor. Then, we couldn't use fair value as well since it would be extremely random.

Maybe market spread and depth are better if we want to look at market situation (assumed order book is valid).

[deisik]

My point is since the market cap formula is, well, market price * circulating supply, you could change the market price variable with something else. However, since there is no book value in crypto, we couldn't use it as a floor. Then, we couldn't use fair value as well since it would be extremely random

The floor is at ground zero

And at zero there's no demand for a coin, which basically tells us that the coin is dead, i.e. no one is willing to buy it at however low the price. That matches forced liquidation (selling out at whatever price is possible to obtain), and by going back in time from that point we can calculate how much the coin was really worth prior to its demise

In this vein, if we want to assess the current worth of a coin, we should kinda look into the future and find out that liquidation value (I think the term fits in well with my idea). For this purpose, we could examine the lifetimes of the now-defunct coins and look for patterns. Then we could apply these patterns to a live coin and see where it gets us