Cryptocurrenc Market capitalization/ CMC / Market cap
I always see many people look at market cap increase / decrease as if it's real fiat going in / out the market.
this is pretty wrong, when you see the market cap increases by 10 billion dollars, it does not mean that 10 billion dollars were injected to the market.
let's first understand how is market cap calculated.
Market Cap =Current Price * Circulating Supply
plain and simple, it does not mean that there is an x amount of dollars "invested" in crypto, these coins were bought at different prices therefore the amount invested in USD is not something cmc can tell you, it's only an indication of the total "size".
for example, if someone wants to buy every BTC out there, whatever the market-cap shows is the amount he needs to pay to buy the whole market. but again this is just the theory it is not practically accurate simply because of this
1- The price will automatically increase the moment he starts buying therefore market cap will increase.
2- supply is going to increase therefore marketcap/size will increase too.
CMC is not even a very accurate number , one main reason is that many bitcoins are "lost".
The "lost bitcoins" could be affecting the price due to less-current-supply but they don't count in marketcap.
at this point you should have already understood that when btc market caps jumps 10 billions, it could actually be due to 10 million dollars buy order that raised the price, with supply remaining constant or increasing marketcap must increase.
everything above applies to when marketcap drops too, it does not mean "money went out of the market" it simply means the price dropped.
