The market capital is the primary value of a crypto-Index like Coinmarketcap or our price index. For a rough comparison, this measure is useful, but it is good for Another? A look at the market capital, and what could be instead.
The market capitalization for the average crypto-disciples, probably one of the most observed Numbers. How often you visit pages, just like Coinmarketcap? Also on BTC-ECHO was just in the bull-Run at the end of December – more often, the market capital is considered. Even now it is thrown in any market analysis is a look at the same thing.
Sometimes the market is taken to be capital, however, too literally. In the recent debate about the purchase of Githubs Microsoft Qiao Wang compared the market capital of EOS, and Github:
EOS, a pre-product network, that found a critical bug right before mainnet launch: 12B
GitHub, a 10-year old application with 30 million monthly active users, awesome UX, and extremely strong network effect: 7B
If this is not irrational exuberance then I don’t know what is.
— Qiao Wang (@QWQiao) June 5, 2018
Comparisons of this kind you often hear in the field of crypto-currencies. As a rough guide, you are not wrong, but often Apples and pears are set the same. So, for example here: The purchase of a company for seven billion US dollars with a current market capital of a crypto-currency. The lies in the Definition of market capital: market capital is the product of the current market price and the Supply of Coins.
The equation implies that a rich entity could actually buy for a period of twelve billion US-dollars the entire EOS. The is screwed, no matter which direction you put it, incorrectly, as the following considerations show.
Coins with low market capital: a whale for little money?
Once a whale who mused about that? You could as the above courses manipulate, would be crypto rich and according to a well-placed sale even actually really rich. The only Problem is that it is expensive to buy significant shares in a crypto-currency like Bitcoin. However, as it is rather unknown Tokens?
As an example, the fictitious BTC-ECHO-Coin, short BEC. Its Supply is 1,000 BEC and the current market price sleek Euro 0.01. Thus, the market capital is only 10 Euro, an amount that each application can!
The whale-in-law thinks, that he wants to keep 50 percent of the currency. A simple calculation in accordance with market capital would come to a necessary sum of 5 euros.
A look at the Order Book shows that the statement is not so easy. Since the whale is interested in a BEC of purchase, only the sales order shown:
|Price per BEC||Number BEC||Total Sum Of Euro|
50 percent of the total Supplies from the BTC-ECHO-Coin correspond to 500 BEC. This means that he needs to buy all sell orders at a price of 0.02 Euro and 200 BEC for 0.05 Euro. Overall, he needs to apply for the acquisition of 50 per cent of the BEC-market capital 16 euros – more than three times as much as he thought!
Market capital represents invested money
It is also interesting that the equity market by an investment of 16 euros increased five-fold . The future Wal bought the Sellorder for 0.02 Euro and had to acquire, to possess the half of the existing Coin-Supplies, a few Coins for 0.05 Euro. Current Coin price is € 0.05. In the case of a Supply of 1,000 BEC a market capital of 50 Euro, with an Investment of 16 euros!
The reverse is also true: The whale could sell his Coins for 0.04 euros. 500 BEC à 0,04 euros and a turnover of 20 euros and a profit of 4, or 25 percent. So it would be a more lucrative sale. The market capital would have fallen to 40 euros – much less than what he sold.
You don’t see, therefore, that the market capital represents the real flow of money into a crypto currency.
Whereupon, instead of the market capital look for?
The question is, what would be the currencies for a size, where appropriate, a meaningful comparison of Crypto. Although interesting observation exist, such as the Metcalfésche law or the Bitcoin Price Equivalence. The Problem is, however, that these sizes are seldom used Index sites like Coinmarketcap or our price index. Instead of an analysis of this complex measured variables, an additional view of the volume of trade is definitely helpful. A view of the first places in terms of trading volume also brings interesting things to light:
Tether has a trading volume, which is a little more than half as high as that of Bitcoin. In General, the structure of the Top 10 does not correspond to that of the market capital. Especially, it is noticeable that with True Chain a unknown Cryptocurrency occurs. If you look at the trade volume together with the change in rate makes it possible to estimate, whether the money is invested in the crypto-currency or has been moved.
After the criticism, a small lance-breaking for the capital market: As emphasized above, the market of capital is an acceptable first Reference. What should be illustrated in this article, is only that one should not read too much into animals, but in addition other variables such as the volume of trade or the change of course must consider.