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Author Topic: How much investment is ACTUALLY represented by the bitcoin "market cap"?  (Read 1825 times)
Taras
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March 11, 2014, 06:34:14 PM
 #21

A true representation-I believe-would be if all bitcoins on earth were dumped, what price would they go for total.
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March 11, 2014, 08:02:42 PM
 #22

A true representation-I believe-would be if all bitcoins on earth were dumped, what price would they go for total.

That would be zero, of course. If everyone that had them was willing to sell them at any price, then they would have to give them all away.

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March 11, 2014, 08:10:50 PM
 #23

A true representation-I believe-would be if all bitcoins on earth were dumped, what price would they go for total.

That would be zero, of course. If everyone that had them was willing to sell them at any price, then they would have to give them all away.
I should say-if all bitcoins for sale were bought up.
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March 11, 2014, 08:49:50 PM
 #24

A true representation-I believe-would be if all bitcoins on earth were dumped, what price would they go for total.

That would be zero, of course. If everyone that had them was willing to sell them at any price, then they would have to give them all away.
I should say-if all bitcoins for sale were bought up.

Then it would be infinite. If everyone that wanted them was willing to buy them at any price then they would have to give everything they own for them.

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March 11, 2014, 09:18:25 PM
 #25

A true representation-I believe-would be if all bitcoins on earth were dumped, what price would they go for total.

That would be zero, of course. If everyone that had them was willing to sell them at any price, then they would have to give them all away.
I should say-if all bitcoins for sale were bought up.

If you could buy all bitcoins at the current market price, the price would be the current market cap

The current market cap is the total amount of money that has been "made" in bitcoin.
If the market cap increases, regardless of why, the total amount of money made increases.
If you buy and the price goes down, the amount of money made decreases.

Minded coins add to the market cap. Bought coins do not add to the market cap, unless the buy results in a higher price.

How much money was required to get it the current price? This has been determined by the laws of supply and demand.
If someone Wanted to buy a Billion Dollars worth of Bitcoin NOW, as in TODAY, meaning in the next hour, Well, that much is not offered at the current prices. So the price would, and as the price rises the market cap increases, and more people will be willing to sell at the higher prices.
How high would a billion dollar buy drive the price? That depends entirely on how long it took holders of bitcoin to offer up a billion dollars worth in total for sale.

Once can make valuation arguments for the current price. A 1T miner costs xxx and will have to run for DD days and consume WW watts costing $$ so 1 bitcoin today should be worth .... whatever that adds up to. But that and a dime still won't buy a cup of coffee.

For bitcoin to really succeed, the bitcoin community desperately needs an easy to understand demand driver for the non-technical market.
& Speculation, which initially good early on, is unlikely to provide long-term sustainability.



Hope that helps
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March 11, 2014, 09:54:51 PM
 #26

A true representation-I believe-would be if all bitcoins on earth were dumped, what price would they go for total.

That would be zero, of course. If everyone that had them was willing to sell them at any price, then they would have to give them all away.
I should say-if all bitcoins for sale were bought up.

If you could buy all bitcoins at the current market price, the price would be the current market cap

The current market cap is the total amount of money that has been "made" in bitcoin.
If the market cap increases, regardless of why, the total amount of money made increases.
If you buy and the price goes down, the amount of money made decreases.

Minded coins add to the market cap. Bought coins do not add to the market cap, unless the buy results in a higher price.

How much money was required to get it the current price? This has been determined by the laws of supply and demand.
If someone Wanted to buy a Billion Dollars worth of Bitcoin NOW, as in TODAY, meaning in the next hour, Well, that much is not offered at the current prices. So the price would, and as the price rises the market cap increases, and more people will be willing to sell at the higher prices.
How high would a billion dollar buy drive the price? That depends entirely on how long it took holders of bitcoin to offer up a billion dollars worth in total for sale.

Once can make valuation arguments for the current price. A 1T miner costs xxx and will have to run for DD days and consume WW watts costing $$ so 1 bitcoin today should be worth .... whatever that adds up to. But that and a dime still won't buy a cup of coffee.

For bitcoin to really succeed, the bitcoin community desperately needs an easy to understand demand driver for the non-technical market.
& Speculation, which initially good early on, is unlikely to provide long-term sustainability.



Hope that helps


This is going round in circles, and I only have so many palms to face with.
I think the question has been answered to my satisfaction, in two different ways. One was aminorex's formula (thank you) and one was the manual approximation of that from exchange closing price/volumes. We're not talking fundamentals, here, which are totally divorced from the price of buying/running a mining rig.
The whole point was to figure out the relationship between investment and price. Market cap is a meaningless measure of bitcoin's value as far as I'm concerned, because the market cap is not what people have paid, or would receive, for their coins. But it's still the metric quoted everywhere...
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March 11, 2014, 10:35:18 PM
 #27

The whole point was to figure out the relationship between investment and price. Market cap is a meaningless measure of bitcoin's value as far as I'm concerned, because the market cap is not what people have paid, or would receive, for their coins. But it's still the metric quoted everywhere...

That is because market cap is the closest and most meaningful value available. The value is not what people have paid or would receive. You are looking for a single aggregate value that represents all the valuations of every person that holds or is aware of Bitcoin. Even though it is not perfect, the market cap is the best measure because the price mechanism gives an actual value instead of a theoretical value.

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pening
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March 11, 2014, 11:03:39 PM
 #28

...Even though it is not perfect, the market cap is the best measure because the price mechanism gives an actual value instead of a theoretical value.

Market Cap is a good measure of something different from what the OP wants.  I'm not sure why it's an issue.  Market cap is the current market valuation, OP wants to know the total amount invested.  The two aren't particularly related, at any time the market cap may be considerably more than that invested, and over time the total invested could be considerably more than the market cap.  History is littered with companies that had millions or billions invested but are worth zilch today; likewise many young companies have astronomical valuations with only a fraction of that invested.
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March 12, 2014, 02:28:16 AM
 #29

It sounds like he wants:

Total cost of coins purchased less total proceeds from coins sold
+total electric bill from miners
+the depreciated cost of mining equipment & rents, leases etc...

Back to market cap:
If you invest $1000 in bitcoin when it was $100, and the price goes to $600, your 1000 investment grows to 6000.
So today, you have $6,000 invested.
You could have sold it for $6,000 at which point you would have zero invested, but you didn't. So the investment remains $6000  Wink

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