How Accurate Is The Bitcoin Market Capital?

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Quote from: JollyGood on July 31, 2020, 04:56:36 PM

With all sorts of fake over-inflated trading volumes being sent to coinmarketcap.com and other websites, how accurate do you think the real value of Bitcoin actually is and what the real market capital of Bitcoin actually is?

It is not about exchanges. Price of Bitcoin is well known. What is not known is how many coins are lost. All lost coins and all Satoshi coins should be excluded from real Bitcoin marketcap. We can speculate that 15% of coins are lost so Bitcoins real marketcap is 15% below what it shows right now. $170B instead of $200B

exstasie

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Quote from: Tytanowy Janusz on August 02, 2020, 06:47:18 AM

Quote from: exstasie on August 01, 2020, 10:06:23 PM

Just wait until Wall Street is done with BTC. Central counterparties typically pledge a unit of collateral to ~1.8x parties beyond the actual owner. https://www.forbes.com/sites/caitlinlong/2018/08/13/the-r-and-c-words-enter-the-vocabulary-of-bitcoin-enthusiasts/

The downside is this has an inflationary effect, in regards to the BTC supply. If people think they own BTC (when they really don't) that effectively reduces demand. In fact, this is one of the ways a lid is kept on asset prices on Wall Street.

That's why it is important to promote events like proof of keys day (Jan 3 each year).

https://hackernoon.com/not-your-keys-not-your-bitcoin-jan3bitcoin-z6k3ktb

And inform people that holding bitcoins on third party wallets is not only risky but also harms bitcoin by inflating it

We might have some success with retail investors (people like you and me) but I believe institutional investors and traders have no interest in taking custody of their own coins. It's all going to be third party custodians like Fidelity Digital Assets.

JollyGood

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I like the interesting way you deduced "it must be real then" Grin

Quote from: Fundamentals Of on August 01, 2020, 10:55:20 PM

If what we see around us are neither the real value of Bitcoin nor the real market capital of Bitcoin, I don't know how or if we could actually come up with a certain value or market cap of Bitcoin which we could consider as real.

What we are presented with right now are the market numbers which are now being accepted by everyone as real. So even if a portion of the volume that somehow drives up the value is fake or the supply of Bitcoin has now actually dwindled down due to lost coins, the resulting market price would still be the basis on which people buy and sell Bitcoin. It must be real then.

Tytanowy Janusz

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Quote from: exstasie on August 01, 2020, 10:06:23 PM

Just wait until Wall Street is done with BTC. Central counterparties typically pledge a unit of collateral to ~1.8x parties beyond the actual owner. https://www.forbes.com/sites/caitlinlong/2018/08/13/the-r-and-c-words-enter-the-vocabulary-of-bitcoin-enthusiasts/

The downside is this has an inflationary effect, in regards to the BTC supply. If people think they own BTC (when they really don't) that effectively reduces demand. In fact, this is one of the ways a lid is kept on asset prices on Wall Street.

That's why it is important to promote events like proof of keys day (Jan 3 each year).

https://hackernoon.com/not-your-keys-not-your-bitcoin-jan3bitcoin-z6k3ktb

And inform people that holding bitcoins on third party wallets is not only risky but also harms bitcoin by inflating it

pooya87

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Quote from: JollyGood on August 01, 2020, 04:14:30 PM

Over analysis can be a real pain but so can under analysis. There are several ways to calculate the most accurate price but how many would factor in the early addresses with many Bitcoins that will probably never be recovered?

and wrong analysis is the worst of all!
you don't "calculate" the price. the price is what it is and the demand wants it to be. and it has nothing to do with how many "early addresses" have bitcoin or are lost.
in bitcoin market it is very easy to get caught up in meaningless factors and keep trying to come up with an analysis that seems to be making sense but it is just an illusion.

Fundamentals Of

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If what we see around us are neither the real value of Bitcoin nor the real market capital of Bitcoin, I don't know how or if we could actually come up with a certain value or market cap of Bitcoin which we could consider as real.

What we are presented with right now are the market numbers which are now being accepted by everyone as real. So even if a portion of the volume that somehow drives up the value is fake or the supply of Bitcoin has now actually dwindled down due to lost coins, the resulting market price would still be the basis on which people buy and sell Bitcoin. It must be real then.

exstasie

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Quote from: Tytanowy Janusz on August 01, 2020, 04:21:27 AM

I dare to assume that by adding together the wallets of all people who think they have bitcoin, we will exceed 21 million even today (with 18 million real bitcoins in circulating supply).

Just wait until Wall Street is done with BTC. Central counterparties typically pledge a unit of collateral to ~1.8x parties beyond the actual owner. https://www.forbes.com/sites/caitlinlong/2018/08/13/the-r-and-c-words-enter-the-vocabulary-of-bitcoin-enthusiasts/

The downside is this has an inflationary effect, in regards to the BTC supply. If people think they own BTC (when they really don't) that effectively reduces demand. In fact, this is one of the ways a lid is kept on asset prices on Wall Street.

JollyGood

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Over analysis can be a real pain but so can under analysis. There are several ways to calculate the most accurate price but how many would factor in the early addresses with many Bitcoins that will probably never be recovered?

Quote from: jackg on July 31, 2020, 06:46:06 PM

Quote from: hatshepsut93 on July 31, 2020, 06:26:54 PM

But market capitalization is a metric that rarely gets used for something productive, most of the time it's just pointless comparing for this value between different assets. It's especially bad when people compare between different classes, like saying "Bitcoin's marketcap is bigger than PayPal".

It's one of those metrics carried over from shares where I think it's helpful for determining things like pe ratios for stocks.. (especially for working out if something is priced too high).

And a lot of the time people just like to produce as many figures as they can to try to work out how a certain asset could look. Much like big data analysers storing more data then they might ever need to process because the storage space was empty anyway (or something).

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What does volume have to do with market cap? It's price times supply.

If there were only one place to trade it and you could only do one trade per hour that is still what would decide the market cap. It doesn't matter if someone's faking volume. Enough exchanges agree on a range of price for an accurate market cap.

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Do I know what the market capital is? I mean as far as I know you take the price of bitcoin and multiply that with the amount of bitcoin in existence and you get the market capital of bitcoin. How could that be wrong? I mean can you buy or sell from the market price right now? If so that means the market capital is 100% correct without any problem.

What you are suggesting is exchanges faking their volume and that doesn't change the price or the market capital, that only changes the volume and how they do that is trade between the spread by buying and selling from each other and that is how they accomplish it, they could even just tamper with the amounts without trading as well if they want to. Hence, that is changing a lot for one exchange but not the whole market.

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Quote from: Tytanowy Janusz on August 01, 2020, 04:21:27 AM

I dare to assume that by adding together the wallets of all people who think they have bitcoin, we will exceed 21 million even today (with 18 million real bitcoins in circulating supply).

Unfortunately I will completely agree with this considering how many BTC forks we have had so far and the fact that we have a certain percentage of crypto users who bought just that forks thinking they are buying BTC. One day they will be quite surprised, I'm sure.

What I believe when it comes to CMC is the data on total/available supply and price which then gives the total market cap. Speculations about how much BTC has actually been lost are nothing but speculations, and are mostly based on the fact that BTC has not moved from some address x years, which is really pretty stupid.

Until recently, we considered these BTCs lost, but then someone showed 2 months ago that this is not the case - so I think that in fact a very small amount of BTC is completely lost.

Tytanowy Janusz

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Quote from: JollyGood on August 01, 2020, 07:50:00 AM

I had no idea Binance had purchased CMC, when did this sale take place?

31 March 2020.
https://www.coindesk.com/binances-coinmarketcap-acquisition-is-a-bet-that-crypto-really-is-for-the-masses

But as i know nothing changed. Binance is just an investor. According to CZ words both companies are self sufficient and both generate profit. So they will operate separately and won't influence each other. CMC will not have any privileges from binance same as binance from CMC. CZ said that CMC team is still in charge and all he can do is giving advices but final decision is in CMC team.

During last AMA, CZ was asked what if someone will develop better product and will take over the market. He answered something like "I hope we will buy them before that happened". That's what was done here i guess. If anyhow CMC will try to take over the market (f.e partnership with uniswap and make a use from the biggest user base crypto companies has ever had + a lot of luck) binance will be the one who will eat the cake.

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I had no idea Binance had purchased CMC, when did this sale take place?

Quote from: Botnake on July 31, 2020, 06:34:31 PM

Quote from: JollyGood on July 31, 2020, 04:56:36 PM

With all sorts of fake over-inflated trading volumes being sent to coinmarketcap.com and other websites, how accurate do you think the real value of Bitcoin actually is and what the real market capital of Bitcoin actually is?

I can't say 100%, but whatever written in coinmarketcap.com are just numbers based on the exchanges that it puts as a basis.
We have p2p transcations or trading that was not included in coinmarketcap.com, so if we will estimate the volume of bitcoin, the figure written in coinmarketcap.com is understated, well, it's hard to compute the volume and amount of bitcoin flowing in and out from p2p trading so we won't have that data. Since coinmarketcap.com was acquired by Binance, I think they are more accurate now, so like I said, I won't say 100% accurate but at least we have some data where we can use as our basic to analyze the market.

exstasie

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Quote from: JollyGood on July 31, 2020, 04:56:36 PM

With all sorts of fake over-inflated trading volumes being sent to coinmarketcap.com and other websites, how accurate do you think the real value of Bitcoin actually is and what the real market capital of Bitcoin actually is?

What's trading volume got to do with market cap, or the value of Bitcoin?

Market cap = total supply issued x price. I think people tend to overestimate its importance. It gives us some idea of the total value held in BTC, but the problem is that illiquidity can really inflate market cap. BTC is capable of irrational market caps during bubbles due to temporary lack of ask side liquidity.

Liquidity (whether you can cash in and out of the market, and at what price) should have some place in any discussion of value.

Tytanowy Janusz

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Quote from: JollyGood on July 31, 2020, 04:56:36 PM

With all sorts of fake over-inflated trading volumes being sent to coinmarketcap.com and other websites, how accurate do you think the real value of Bitcoin actually is and what the real market capital of Bitcoin actually is?

Fake trading volumes are made by grinding the same coins in place. It does not push price in any direction (so the market cap whis is price x supply). People excited about volumes (f.e "wow break resistance with such huge volume i have to be in") buys but I don't think that it has any significant impact on bitcoin price.

But what is a "real market capital of Bitcoin" is a good and interesting question.

@jackg pointed at lost bitcoins that push "real MC" lower. I'll point at something called fractional reserve system implemented by exchanges and crypto banks that push "real MC" much higher.

https://bitcointalksearch.org/topic/m.49096584

I dare to assume that by adding together the wallets of all people who think they have bitcoin, we will exceed 21 million even today (with 18 million real bitcoins in circulating supply).

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Quote from: pooya87 on August 01, 2020, 02:47:58 AM

3) it has nothing to do with volume and exchanges or sites like CMC can only fake volume.

I think the OP was asking about how trading volume could impact the price, and how the inflation of those volumes by exchanges could manipulate the market price of Bitcoin and by extension the market cap. There's also the case of OTC trades which are done off the market to suppress the impact it may have had on the market price, which is also a form on manipulation.
Granted, the price, circulating supply and market cap cannot be manipulated directly in the case of Bitcoin..

OP, you could try averaging the values on various price tracking website to avoid relying on information from just one

pooya87

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so many mistakes all in one place Cheesy

1) a little nitpick but it is market cap. or market capitalization
2) it does NOT represent value. it is more like a size of the market (that is the case for cryptocurrencies at least) and it is only accurate if the supply is real which means no premine, no ICO, no secretly owned coins by the dev,... it is also defined for stocks and not much else. so it doesn't make that much sense to even be used for something like bitcoin or any other cryptocurrency for that matter.
3) it has nothing to do with volume and exchanges or sites like CMC can only fake volume. market cap is the result of price multiplied by supply. the price is obvious and the circulating supply can be calculated by anyone. neither can be faked. so the result is always an accurate number, how much weight you want to put in that meaningless number is your own choice!

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Quote from: JollyGood on July 31, 2020, 04:56:36 PM

With all sorts of fake over-inflated trading volumes being sent to coinmarketcap.com and other websites, how accurate do you think the real value of Bitcoin actually is and what the real market capital of Bitcoin actually is?

Well,you will have to ask someone that is working in some big crypto exchange platform or coinmarketcap.
I don't believe that anyone in the forum has such insider information.
The question about how the fake trading volumes are pumping the Bitcoin price has been asked many times in the last few years and there's no satisfying answer.I think that,if the BTC price gets pumped by fake trading volumes,the crypto market will sooner or later "punish" such dirty tricks by crashing the price,so such faking will have only short term impact.

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Quote from: hatshepsut93 on July 31, 2020, 06:26:54 PM

But market capitalization is a metric that rarely gets used for something productive, most of the time it's just pointless comparing for this value between different assets. It's especially bad when people compare between different classes, like saying "Bitcoin's marketcap is bigger than PayPal".

It's one of those metrics carried over from shares where I think it's helpful for determining things like pe ratios for stocks.. (especially for working out if something is priced too high).

And a lot of the time people just like to produce as many figures as they can to try to work out how a certain asset could look. Much like big data analysers storing more data then they might ever need to process because the storage space was empty anyway (or something).

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Quote from: JollyGood on July 31, 2020, 04:56:36 PM

With all sorts of fake over-inflated trading volumes being sent to coinmarketcap.com and other websites, how accurate do you think the real value of Bitcoin actually is and what the real market capital of Bitcoin actually is?

I can't say 100%, but whatever written in coinmarketcap.com are just numbers based on the exchanges that it puts as a basis.
We have p2p transcations or trading that was not included in coinmarketcap.com, so if we will estimate the volume of bitcoin, the figure written in coinmarketcap.com is understated, well, it's hard to compute the volume and amount of bitcoin flowing in and out from p2p trading so we won't have that data. Since coinmarketcap.com was acquired by Binance, I think they are more accurate now, so like I said, I won't say 100% accurate but at least we have some data where we can use as our basic to analyze the market.

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