Question about MarketCap and Cashing Out

[QEHedge]

So lets say BTC is worth 100K / BTC

Now lets say that i have 1 BTC , and i wish to sell it to someone and they say "I'll give you cash -5%"

So i take Fiat money , and take out 95k and proceed to send them the BTC.

Would the market cap go down if i took out 95k out of the market cap?

How would anyone know or how would the metrics figure out that 95k has been taken out in cash if i have just sent BTC to someone else?

Thanks everyone!

[ChrisPop]

I think you should learn how the markets work. What you have described above is an OTC (Over-The-Counter) transaction which is not on a public exchange, but offline or on an exchange like LocalBitcoins. The market cap of an asset is determined by the product of the last market price and the number of units in circulation. Moreover you're just transfering your asset to another person, you're not really taking away from MC. You can only do that if you have the financial power to change prices like making a huge market order of tens of million of dollars worth depending on the liquidity of the market and the participants.

[dothebeats]

No. This is a case of an OTC trade that is not recorded within any trading platform and would, therefore not reflect and complement with the metric. Besides, total msrket cap is a vague representation for the whole of the market and is not really a dependable source of information when it comes to gauging the markets and/or making decisions for your next trades--if the market even helps.

[aardvark15]

I don’t think a sell has anything to do with market cap because there is both a seller and a buyer.  You are selling for 100,000 but someone else is buying for 100,000.  I think the market cap is based on the value of each Bitcoin which is 100,000 in your example.

[panganib999]

Not really I'd suppose. It was a personal transaction where records were only saved towards the both of you, so I suppose not? It's like how A meetup is different from buying it online. Sides, with the peer to peer transaction right there, Price could be freely changed depending on the seller themselves, so let's say BTC is at $100k and Seller decided to sell at $50k. If transac was a success, I doubt you could say that BTC dropped to $50k there and then, after all, only you two were involved and the money was sent directly to the seller. It's trading, but from human to human, not from market to human.

[avikz]

So lets say BTC is worth 100K / BTC

Now lets say that i have 1 BTC , and i wish to sell it to someone and they say "I'll give you cash -5%"

So i take Fiat money , and take out 95k and proceed to send them the BTC.

Would the market cap go down if i took out 95k out of the market cap?

How would anyone know or how would the metrics figure out that 95k has been taken out in cash if i have just sent BTC to someone else?

Thanks everyone!

You need to learn how the market capitalization is calculated.

Let's assume the price of 1 bitcoin is $1000 and there is 500 bitcoins mined till date. So at this scenario, bitcoin's market cap will be,

($1000 x 500) = $500000

It's that simple! It doesn't really matter who is selling or buying bitcoin to whom! So the market cap of any coin is not 100% accurate and sometimes misleading as well!

Hope this helps!

[gentlemand]

Market cap is a really, really crappy metric but we seem to be stuck with it. It's purely the current price on an exchange multiplied by the number of all mined coins.

You could reduce Bitcoin's market cap by $50 billion by selling a few tens of millions of dollars worth of BTC in quick succession. The price is set by what's on the exchanges and there isn't a great deal on there to meet a giant sell.

[webtricks]

Market cap is a really, really crappy metric but we seem to be stuck with it. It's purely the current price on an exchange multiplied by the number of all mined coins.
You could reduce Bitcoin's market cap by $50 billion by selling a few tens of millions of dollars worth of BTC in quick succession. The price is set by what's on the exchanges and there isn't a great deal on there to meet a giant sell.

That's true, market cap is hypothetical metric. It has no real application and assessment.
Moreover, market cap depends upon the source from which the value is being scraped and calculated. I may sell 1 or even 1000 BTC to someone for $5 each on Exchange A but it won't affect the market cap if Exchange A is not being considered to calculate marketcap. On the contrary, selling even 0.0005 BTC for $5 on Exchange B will drop the marketcap (although for a fraction of second till another order is executed) if Exchange B's data is being used to calculate Market Cap.

[Ucy]

So lets say BTC is worth 100K / BTC

Now lets say that i have 1 BTC , and i wish to sell it to someone and they say "I'll give you cash -5%"

So i take Fiat money , and take out 95k and proceed to send them the BTC.

Would the market cap go down if i took out 95k out of the market cap?

How would anyone know or how would the metrics figure out that 95k has been taken out in cash if i have just sent BTC to someone else?

Thanks everyone!

The price is simply determined by demand and supply. Better still, the buyers and sellers determine the price of Bitcoin.
For example:    if there are too many sellers than buyers selling at market price of $10,000 per bitcoin, the sellers will be queued until they find more buyers willing to buy at that price. If the numbers of buyers remain low, some sellers will sell at lower available prices. This data is automatically calculated on multiple exchanges and used to determine the average price of Bitcoin.
So, your transaction will have little effect on the price unless there are many sellers like yourself and less buyers

[QEHedge]

Market cap is a really, really crappy metric but we seem to be stuck with it. It's purely the current price on an exchange multiplied by the number of all mined coins.

You could reduce Bitcoin's market cap by $50 billion by selling a few tens of millions of dollars worth of BTC in quick succession. The price is set by what's on the exchanges and there isn't a great deal on there to meet a giant sell.

Thats interesting , Because i always thought of it like this...

If there is 17M BTC in circulation and BTC price is $100,000USD Then market cap should be... 1.7 Trillion right?

I think you should learn how the markets work. What you have described above is an OTC (Over-The-Counter) transaction which is not on a public exchange, but offline or on an exchange like LocalBitcoins. The market cap of an asset is determined by the product of the last market price and the number of units in circulation. Moreover you're just transfering your asset to another person, you're not really taking away from MC. You can only do that if you have the financial power to change prices like making a huge market order of tens of million of dollars worth depending on the liquidity of the market and the participants.

So recently the market has lost 30-50B in market cap , So i'm assuming that institutions are buying BTC and then dumping it on the market whilst shorting it. If they made a bunch of Fiat Backed Crypto currencies (Through "QE") , Couldn't they just buy up the tokens , Long the price and then Sell the tokens and short it down again? Is that what is happening in the market right now?

Is there a better metric than Market Cap or is this the only metric that is used to measure the actual value of BTC ?

[o_e_l_e_o]

If there is 17M BTC in circulation and BTC price is $100,000USD Then market cap should be... 1.7 Trillion right?

Correct, but that doesn't mean there is 1.7 trillion USD in the market.

Think of it like this. I create a coin that has a supply of 10 million. I then sell a single coin to my friend for $10. My coin's marketcap would now be $100 million, despite the fact that only $10 has changed hands. This is an extreme example, but the same principle applies.

Only a small amount of the bitcoins in circulation are currently being traded or locked up in various orders. Looking at Coinbase Pro right now, the price is $7,156. There are buy orders for 200 bitcoins between that price and $7,058. Lets say sell 200 bitcoins to fulfill all those buy orders. I would take about $1.4 million out of the market. The marketcap (if calculated solely from Coinbase Pro), however, would drop by (18 million * (7156-7058)) = $1.7 billion, so over 1000x as much.

[dunfida]

How would anyone know or how would the metrics figure out that 95k has been taken out in cash if i have just sent BTC to someone else?

Thanks everyone!

OTC trades wont count in plus to those transactions outside on any exchange platform.Its really not that ideal to completely rely on CMC price information
yet those numbers are average price in all exchange platforms out there.Okay lets say that youve taken some amounts or bulk numbers of btc on sell
then if its that big enough then it will surely affect overall market price.

[mu_enrico]

Market capitalization only acts as an indicator and not to be taken too literally. Economics/finance isn't a "hard science" like physics that you can measure variables with certainty, e.g., gravity 9.807 m/s²

Indicators in finance could help with your investment decision, but it is still an estimation and prone to error.

Food for thought:

I could create an ERC-20 token, let's call it (SHIT) with the total supply of 1,000,000 SHIT and listed it on small exchanges. Then I bought 100 SHIT using $100. Is that mean that the SHIT market cap is now $1,000,000 ?

[Trela]

Is there a better metric than Market Cap or is this the only metric that is used to measure the actual value of BTC ?

Market cap is not the real value used to measure the value of Bitcoin accurately. It is relative and exaggerated.
Liquidity, trading volume, and BTC Dominance are more reliable data, although all three can be fake by third-party sources of information.

[deisik]

Would the market cap go down if i took out 95k out of the market cap?

Market cap is a mathematical abstraction

As you may know, it is simply a product of multiplication of the amount of coins mined so far by their market price. In this way, no matter how much money you take from the market, it is not going to affect the market cap unless your sell order is large enough to change the price. If this is not what you meant, then the market cap is very misleading as it doesn't tell us anything about real liquidity of the market since this is what actually counts

How would anyone know or how would the metrics figure out that 95k has been taken out in cash if i have just sent BTC to someone else?

If you are selling in the open market, that could affect the price (depending on how much you sell)

[stompix]

I don’t think a sell has anything to do with market cap because there is both a seller and a buyer.  You are selling for 100,000 but someone else is buying for 100,000. 

Try to read and understand before posting.
He clearly said he was selling at -5% the price!

Market cap is a really, really crappy metric but we seem to be stuck with it. It's purely the current price on an exchange multiplied by the number of all mined coins.
You could reduce Bitcoin's market cap by $50 billion by selling a few tens of millions of dollars worth of BTC in quick succession. The price is set by what's on the exchanges and there isn't a great deal on there to meet a giant sell.

Unfortunately, you can simply change the market cap by choosing different exchanges...
Just the difference from Coinbase and Bitfinex right now would make the market cap swing by 600 million.
Really useless metric, especially since it is obvious some coins will never be sols as they are lost forever.

[jalil_113]

Unfortunately, you can simply change the market cap by choosing different exchanges...
Just the difference from Coinbase and Bitfinex right now would make the market cap swing by 600 million.
Really useless metric, especially since it is obvious some coins will never be sols as they are lost forever.

I've always wondered why in the world do exchanges put that metric anyway.
So it shows basically nothing important for us users

About OP's question - I think the market works in other way. People decide what price is fair for things (especially when it comes to currencies).
The more people want it - the higher price basically.
Person who buys BTC for 95k will wait until he can sell it for 105k. And all that time while he waits - more people wants bitcoin and price goes up (or the opposite way if BTC lacks popularity)

[Cherylstar86]

So lets say BTC is worth 100K / BTC

Now lets say that i have 1 BTC , and i wish to sell it to someone and they say "I'll give you cash -5%"

So i take Fiat money , and take out 95k and proceed to send them the BTC.

Would the market cap go down if i took out 95k out of the market cap?

How would anyone know or how would the metrics figure out that 95k has been taken out in cash if i have just sent BTC to someone else?

Thanks everyone!

On my own perception, it may affected for just a while but it will recover it afterwards. Well, on your point about that BTC volume , there are a lot of users who will try a risk and may take a profit just like a give and take unless a very huge amount of volume that may affect on the whole crypto currency community.

[vintages]

Buying and selling of Bitcoin is just like the normal day buying and selling. While you are selling, someone somewhere is buying the same amount or even more. Just like a trade, so there will be up and down in the chart.

But most importantly, when you want to sell Bitcoin in an exchange, your complete amount which is the 100k will be given. Or else, you know the buyer physically and there is a mutual agreement between you two to pay in certain percentage.

Make a good research on Bitcoin trading to know more.

[clickerz]

Is there a better metric than Market Cap or is this the only metric that is used to measure the actual value of BTC ?

Market cap is not the real value used to measure the value of Bitcoin accurately. It is relative and exaggerated.
Liquidity, trading volume, and BTC Dominance are more reliable data, although all three can be fake by third-party sources of information.

I agree with you. I always check their trading volume and also I agree that data are being manipulated by some exchange. I think 95k/100K is not enough to crash the market in my opinion. Though it may affect some time but there are also another person who pushes for the price.