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Author Topic: [Manipulation 101] Market cap (to all who love repeating it these days)  (Read 1882 times)
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March 26, 2017, 06:52:30 AM
Last edit: May 04, 2017, 09:14:48 AM by Pursuer
 #1

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)

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?


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March 28, 2017, 06:31:25 AM
 #2

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.

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March 28, 2017, 09:53:17 AM
 #3

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.

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March 30, 2017, 09:58:20 PM
 #4

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

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March 31, 2017, 08:01:55 AM
 #5

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

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

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March 31, 2017, 11:09:00 AM
 #6

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.

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March 31, 2017, 11:35:06 AM
 #7

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.
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March 31, 2017, 04:09:25 PM
 #8

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.

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March 31, 2017, 05:49:41 PM
 #9

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.
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March 31, 2017, 06:01:07 PM
 #10

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

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April 02, 2017, 07:36:33 AM
 #11

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

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.

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.

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.

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April 02, 2017, 08:13:42 AM
 #12

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

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

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

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April 02, 2017, 08:24:06 AM
 #13

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.

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April 02, 2017, 02:02:34 PM
 #14

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.

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 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).

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April 02, 2017, 02:23:33 PM
 #15

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

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April 03, 2017, 06:10:57 AM
 #16

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.

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 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).

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,...

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April 03, 2017, 10:17:30 AM
 #17

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.

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.
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April 03, 2017, 10:57:49 AM
 #18

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.

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)?

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April 03, 2017, 11:55:45 AM
 #19

I know right Cheesy 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 Cheesy but those with a bit of brain know what I'm talking about.

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deisik
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April 03, 2017, 01:34:59 PM
Last edit: April 03, 2017, 01:45:51 PM by deisik
 #20

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

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)

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