Price is directly proportional to Market Cap?

[aditya6997]

Whenever there is price ups then there is huge market cap!

[1714771950]

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[1714771950]

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[1714771950]

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[pooya87]

market capitalization is a wrong factor to be used for cryptocurrencies. it is used for stocks and to show the value of a company and it is wrong to use it for cryptos!

the way it is calculated is to multiply supply and price so when price goes up, market cap goes up with it. and the same way as the supply goes up or is already huge the market cap is also going up with it.

[Bervelukan]

Yes it is true and it is like that in the science of trading and it is sure to happen, and now the prices have started to crawl for a better ride.

[maxim000]

Whenever there is price ups then there is huge market cap!

It is a general convention that in order to see the price surge, the total net inflow have to increase. Suppose there are 20 million Bitcoin and total market cap is 40 million, then each BTC would be priced at 2$. In the same way, if the total market cap is 20 Billion, then each bitcoin would be priced at 1000$. So, the more the market cap for a particular coin, the higher its price would go and henceforth, every time we see a rise in price, the total market cap also increases simultaneously.

[mk4]

Just so if you didn't know, Marketcap = Price * Circulating Supply

Hence, $139,212,259,994 = $8,195.73 *  16,985,950 BTC

So when price increases, marketcap also increases.

[Wheelige]

Market Cap is really a weird way of assessing the 'worth' of an asset like cryptos. It suggests that the entirety of the asset is worth Y because the current price of Asset is worth X. But This really doesn't work with cryptos because of the volatility of price. The value of the entirety of the asset doesn't move by the swings in market cap. If you flood the market with a fraction of the Cap then you would be selling for peanuts, therefore the asset inst really worth that at all. There is also a global arbitrage where prices are different on different exchanges, so if you sold it all in Korea (assuming you could) then it would be worth more than if you sold it in USA (again assuming that you could).

Essentially just ignore market cap because it is stupid.  Current price and total supply are directly proportional to market cap and this gives a stupid valuation of the asset.

[Reatim]

Whenever there is price ups then there is huge market cap!

Of course. You don't need to be a rocket scientist to recognized this. Remember when we have 800 million market cap? Bitcoin was worth around $15K-$19K and Ethereum around the $1K barrier.

But as just want they say here, marketcap is not a true gauge because there are really shit coins out there who's value is nothing. And shitcoin is just pure pump-and-dump scheme.

[sandor111]

market capitalization is a wrong factor to be used for cryptocurrencies. it is used for stocks and to show the value of a company and it is wrong to use it for cryptos!

the way it is calculated is to multiply supply and price so when price goes up, market cap goes up with it. and the same way as the supply goes up or is already huge the market cap is also going up with it.

I know what you try to say, when price of some random coin goes up, for example because of pump&dump group or some announcement, this doesn't mean that value of that cryptocurrency is current high price multiplied by circulating supply, because only a fraction of all coins were bought at that highest price but most people are not prepared to pay the same price so it's wrong to valuate the entire cryptocurrency at the same price.

I partly agree with this, but I don't understand why you think that this is ok for valuating company, while it is not for cryptocurrency. I think it's very similar. Successful companies like Apple or Tesla also have "overpriced" stock price because people believe in those companies and their future potential, demand for stocks is big and price goes up. The value of company is calculated based on current price of one stock, again, multiplied by number of stocks. Which is not realistic if you ask me. Ok, company has some physical property like real estate and machinery, but the value of company is few times more than value of that property alone.
Also companies create new stocks sometimes, just like circulating supply of cryptos is slowly growing.

My conclusion would be that market cap could be misleading indicator sometimes (especially during rapid growth - pump&dump) but when price of one cryptocurrency is relatively stable, market cap is about as important information about crypto value, as it is relevant for company value.

[pooya87]

I partly agree with this, but I don't understand why you think that this is ok for valuating company, while it is not for cryptocurrency. I think it's very similar. Successful companies like Apple or Tesla also have "overpriced" stock price because people believe in those companies and their future potential, demand for stocks is big and price goes up. The value of company is calculated based on current price of one stock, again, multiplied by number of stocks. Which is not realistic if you ask me. Ok, company has some physical property like real estate and machinery, but the value of company is few times more than value of that property alone.
Also companies create new stocks sometimes, just like circulating supply of cryptos is slowly growing.

i know for a fact that using market cap for cryptocurrencies is completely wrong. but maybe you are also right and it is not a good thing for companies either.
but also it is not at all comparable with altcoins. shares of a company are not something virtual and out of thin air. for example i can't just start a new company in my basement and do nothing and also have billions of shares on the market https://www.quora.com/How-does-a-company-decide-on-the-number-of-shares
but i can start a new altcoin and do nothing and in a blinking of an eye (from thin air) have billions of coins in circulation (virtually of course).
not to mention that altcoins usually have premines which means circulating supply is not at all what we see on sites like coinmarketcap.com

[stompix]

I partly agree with this, but I don't understand why you think that this is ok for valuating company, while it is not for cryptocurrency. I think it's very similar. Successful companies like Apple or Tesla also have "overpriced" stock price because people believe in those companies and their future potential, demand for stocks is big and price goes up. The value of company is calculated based on current price of one stock, again, multiplied by number of stocks. Which is not realistic if you ask me. Ok, company has some physical property like real estate and machinery, but the value of company is few times more than value of that property alone.
Also companies create new stocks sometimes, just like circulating supply of cryptos is slowly growing.

Apart from the obvious differences between a coin and a company, there is one crucial thing that makes the marketcap number unreliable especially in the case of BTC
And that is lost coins.

The current marketcap takes into account the total supply of coins that has been mined but thousands of them are lost forever.
If Satoshi has lost his keys then at leat 1/16 of the marketcap is fake.

This article claims that at least 4 million coins have been lost:
http://fortune.com/2017/11/25/lost-bitcoins/

According to new research from Chainalysis, a digital forensics firm that studies the bitcoin blockchain, 3.79 million bitcoins are already gone for good based on a high estimate—and 2.78 million based on a low one. Those numbers imply 17% to 23% of existing bitcoins, which are today worth around $8,500 each, are lost.

Funny how the price is almost the same

[Slark]

Like others said already - marketcap is not exactly the best instrument/indicator to evaluate bitcoin.
It says nothing about real usage of a coin, it is measured differently for other types of coins which may have to use another type of distribution.
No one is taking into consideration total number of tokens vs. current coins in circulation etc. It's better if you just stop paying attention to Market Cap.

[Basmic]

The capitalization of the cryptocurrency increases as the demand for it grows. But there are many speculators in this market. This capital is unstable. Speculators can withdraw capital from the market at any time. This reduces the price of coins and provokes panic in the market. The cryptocurrency market does not have regulators and therefore standard methods are not suitable for its evaluation.

[buwaytress]

At risk of repeating above posts, with pooja's most comprehensive, the important thing to note when comparing market cap of crypto against stocks is that supply increases almost daily with most crypto, whereas they're pretty much fixed for company stocks. So, even with prices contracting, you could see market cap sustained or even increase, especially when some alts arbitrarily create and release supply (cough Tether).