All Market Cap? Thoughts on market capitalisation

The market capitalization is the primary size of a crypto-Index like Coinmarketcap or our price index is determined. For a rough comparison, this measure is useful, but it is good for Another? A glance at the market capitalization and the Alternative.

Dr. Philipp Giese
6. September 2019BTC$10.655,31 1.14%part Facebook Twitter LinkedIn xing mail

The market capitalization for the average crypto-Disciples, probably one of the most observed Numbers. How often you visit sites like Coinmarketcap? Also on BTC-ECHO was just in the Bull Run at the end of December 2017– more often, the market capitalization is considered. Even now it is thrown in any market analysis is a look at the same.

Sometimes, the market is taken capitalization, however, too literally.

As a rough guide, you is not wrong, but sometimes you seems to be inaccurate. The lies in the Definition of market capitalization-founded: it is the product of the current market price and the Supply of Coins.

Coins with a low market capitalization: whale, be for little money?

Once a whale who mused about that? You could manipulate how the above rates would be crypto rich and according to a well-placed sales Empire. The only Problem is that it is expensive to buy significant shares in a crypto-currency like Bitcoin. However, as it is rather unknown Token?

As an example, the fictitious Coin, in short, BEC is used. Its Supply is 1,000 BEC and the current market price sleek Euro 0.01. Thus, the market capitalization 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: According to market capitalisation would come to a necessary sum of 5 euros.

A glance at the Order Book shows that the statement is not so easy. Since the whale is interested in a BEC of purchase, we will consider a little more the sell order. We say that the Order Book currently 300 BEC for 0.02 Euro are listed. For more BEC are more expensive to acquire.

50 per cent of the total Supplies of the Coins 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 capitalization is not equal to invested money

it is also Interesting that the market capitalization five-fold through an investment of 16 euros has. The future whale bought up the Sell Order for 0,02 Euro and still had to purchase some Coins for 0.05 Euro to own one-half of the existing Coin Supplies. Current Coin price is € 0.05. In the case of a Supply of 1,000 BEC one thus obtains 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 capitalisation had 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.

pay attention to What, instead of the market capital?

the question is, what size would be currencies make more sense for comparison, the Crypto ensures. Although interesting observation exist, such as the Metcalfésche law or the Bitcoin Price Equivalence. The Problem, however, is that these sizes tend to be rarely used by Index pages. 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 the market capitalization. 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.

According to the criticism, a small lance-breaking for the market capitalization: As emphasized above, it 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.

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