Topic: What is Market Cap (Read 232 times)

I completely agree, it's all part of the circulating supply.

It's just a curiosity to me, sort of like watching untouched Bitcoin block rewards from 2009. Just like Satoshi's coins, huge lots of pre-sale ETH could still hit the market at any time, even as people speculate that they are lost.

In my opinion, it doesn't matter how much ETH have not been moved yet. Even untouched Ethereums should be considered circulating unless they are owned by developers. 
Assume that someone has bought 100,000 ETH in pre-sale and is still holding them. Those 100,000 ETH are part of real circulating supply.

Market cap is a very misleading term in crypto and we should stop use it for our investment decisions or assessments. The level of misleading severity increases if you apply marketcap term to altcoins.

Each time, mostly with bull market, we have new generations of investors who join the market and hear the term 'marketcap', then they are mislead with it. Then, with their turns, they will mislead other new generations of investors, so on and so on.

https://www.wsj.com/articles/stop-talking-about-bitcoins-market-cap-1513015626

I wouldn't disagree with that. Ethereum's switch to proof of stake will certainly be interesting to watch, but there are few other altcoins which are seriously exploring alternative mechanisms and not just trying to make money. Most altcoins I've seen which advertise themselves as using proof of stake, proof of capacity, proof of proof, or any of the other mechanisms either have not thought it through (either because they didn't have the knowledge to or they didn't care enough) and it fails, or never really had any intention of seriously implementing it in the first place, and were only using it as an advertising slogan.

This is it. Anyone can launch a new token with a flashy website for very minimal costs. You don't even need to have any coding skills as you can just plagiarize from an existing token and most people won't notice or care. You can shill it all over the forum, Twitter, Reddit, Facebook, YouTube, Medium, etc. at no cost by paying people in your new token which you can print at will. It's a cheap and easy way to rip people off.

Maybe you'll understand some things when you get senior member, some learn from their mistakes, smart at the mistakes of others. All I can say is that all the projects I was involved in one way or another failed, and that Bitcoin over the years has been the only constant. If you think there are some projects / coins that are good and have some purpose, you invest your money and watch what happens after 2-3 years.

Altcoins are cheap way to make money from thin air, and everyone who has no honor and morals (read: anyone who can cheat others without biting conscience) already made his coin and heaped up a bunch of money on those who believe in "projects with very innovative ideas, precise vision and clear roadmap".

It's true that 72 million ETH were created out of thin air, but they were distributed to about 9,000 accounts based on the pre-sale. They're not held by the ETH Foundation or "locked" or anything like that. Every once in a while, a pre-sale investor moves tens or hundreds of thousands of them and everyone freaks out.


That's the amount of mined ETH. The circulating supply is much higher.

Does anyone know an easy way to identify how much ETH is still untouched from the genesis block transactions?

i answered your comment in that other topic that could hopefully clear up what i meant by my comment https://bitcointalksearch.org/topic/m.53903812
the problem is when we play fast and loose with the word "circulating supply". a circulating supply means a supply that is in circulation and is accessible by the public.

here is a real world example. when ETH came out it didn't start slowly giving mining reward to miners as a PoW coin does, instead it had a gigantic premine of 72 million coins. THAT value was considered ETH's circulating supply. that is WRONG because there is nothing circulating about that.
consequently the current circulating supply of ethereum that is reported to be 109.8 million is fake. the REAL circulating supply is a lot less than that at 37 million which reduces its market cap by 66%

For the most part, yes, but there are a good number of exceptions to that. I think theorizing and testing alternative means of consensus like proof-of-stake and proof-of-space are worthy causes. If we could find a less resource-intensive but equally secure process as POW, that would silence a lot of the environmental critics. It could improve decentralization of the consensus process too, given how most Bitcoin users can't realistically participate in mining.

No altcoins have actually come close to solving the above dilemma, though.

I obviously can't speak for everyone, but for me there are three reasons I ignore most altcoins.

First of all, most altcoins are a solution in search of a problem. They come up with some idea, shoehorn blockchain in to it, launch a token, and then try to market it is as some revolutionary new development. The majority of problems in the world can be solved without using a blockchain, and of the ones which do need a blockchain almost never need a token. I work in healthcare, and there are some real projects working on applying blockchain to real problems within the health sector, such as storing and sharing patient data. These projects are working with and funded by industry leaders and multinational corporations. They don't have a token, and they aren't trying to shill to newbies. They are just quietly getting on with it. Altcoins launch with no product, no development, and no real world use or demand. Compare this to bitcoin, which was a huge amount of work and built from scratch (not just creating a token on Ethereum which can be done by anyone in <1 hour), launched, functioning, and continuing to be developed, long before anyone had to spend any money on it. You want me to invest? Then create something tangible to invest in.

Secondly, we've seen it all before. I don't know if you were involved in crypto back in 2017 during the big bull run. There were thousands of projects with "innovative ideas, precise vision, and clear roadmap". Every single one of them turned out to be trash and a lot of people lost a lot of money. Here are some of the coins which I remember being heavily shilled on here/reddit/twitter at the time:

https://coinmarketcap.com/currencies/dragonchain/
https://coinmarketcap.com/currencies/poet/
https://coinmarketcap.com/currencies/deepbrain-chain/
https://coinmarketcap.com/currencies/bounty0x/
https://coinmarketcap.com/currencies/nano/
https://coinmarketcap.com/currencies/icon/
https://coinmarketcap.com/currencies/request/

Every single one of them just made their creators a ton of money and dumped on everyone who bought it. Every single one of them down ~99% with no ongoing development. Every innovative idea forgotten and every clear roadmap abandoned.

Third, most of them are outright scams. They don't even attempt to do the things we've just mentioned (come up with an idea or even write a whitepaper). They just plagiarize some code and a website, shill the hell out of it with bots or newbies paid in their worthless token they just created out of thin air, and then dump on anyone they can and leave with some profit.

Can you help understand your conclusion XD, I don't understand why most of the senior members only care about bitcoin and consider altcoin as absolute carbage. I can't get it because I am seeing a lot of potential success project with very innovative ideas, precise vision and clear roadmap and they are delivering what they promised too and ofc the main idea about selling tokens is generating money to build their projects and thus gain profits for their owner as you said but still there exist some very interesting projects out there willing to bring real value and I can name some.

Thank you for the good explanation, indeed I saw many projects using fake volume, I remember seeing a project on CMC with an insane ROI like 1500%.

Exactly.
The market cap by circulating supply is more accurate than the one by total supply when determining the value of a coin. Still, it can't be considered as a reliable metric because of price manipulation.

No you're wrong and BrewMaster is right.
There is not only one market cap (on CMC and elsewhere) but two :
The market cap by circulating supply https://coinmarketcap.com/coins/
And the market cap by total supply https://coinmarketcap.com/coins/views/market-cap-by-total-supply/
If you look at the market cap by total supply you will see that a shitcoin is even above Bitcoin because of its total supply...

Such explanations are definitely something that can help many understand why an altocin like XRP may be so high on the list, which many actually use to portray some coin as successful. I admit that at the beginning of my interest in crypto, I was also convinced that some altcoins had a future and were worth something because they were high on the CMC list.

Fortunately, I read similar explanations 5-6 years ago and realized that the whole thing is actually manipulation of high circulating supply combined with good marketing that sells an idea and generates profits for owners.

That's not accurate. The market cap is simply the most recent price multiplied by the circulating volume. It doesn't say very much about the total value whatsoever.

Example: I create a new token with a supply of 1 billion. My token has no function and serves no purpose. Nobody wants it. I go to the altcoin boards and shill it, and some newbies fall for it and want to buy some. I find someone to buy 10 tokens for $10. The price of each token is therefore now $1, and my token now has a marketcap of $1 billion and has immediately become a top altcoin. Does my token with no purpose and no function suddenly have a "total value" of $1 billion? Of course not. Marketcap is next to useless when the supply can be artificial created and managed by the creators of the project.

As BrewMaster said on the post you linked to, many altcoins realize this, and if they released all 1 billion tokens at once they would make no money whatsoever (which, let's be honest, is the only reason the vast majority of altcoins even exist - to make their creators easy money and rip off "investors"). So they release 1 million tokens, sell them for $1, still end up with a ridiculously over-valued marketcap, and then can slowly sell the 900 million extra they were keeping themselves for a profit.

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There is no single good metric to use. Volume can give an idea, as in my example above, if you saw a project with a marketcap of $1 billion but a volume of only $10, you would know it is a scam. However, we also know that many of the top scams such as BSV pump out loads of fake volume, exactly to trick people in to thinking it is popular when it isn't.

Many newbies don't pay attention to the supply, only the price. We regularly see newbies buying scam coins like XRP because "they are much cheaper than bitcoin", not understanding that there are 100 billion XRP in existence and so the price will never be more than a dollar or two. Not to mention the creators are "holding" over 50 billion which they dump a portion of on the market whenever they want some profit.

when we discuss gold's value, we usually discuss it as "price in $/troy ounce". the market cap doesn't normally enter the discussion. maybe we should just be content with using price as a gauge for value.

another interesting idea would be to normalize all market caps based on bitcoin's circulating supply. this would mitigate the skewed picture that high circulating supplies produce. for example:

(ETH circulating supply = 109,830,386) / (BTC circulating supply = 18,234,512) = 6.023215
(ETH market cap = $29,367,301,228) / 6.023215 = $4,875,685,365

normalizing for ETH vs BTC circulating supply would reduce ETH's market cap by a factor of 6. this seems like a better metric than market cap based purely on circulating supply.

So what could represent the value of a project if the market cap can be manipulated, also, what the purpose of using billion of tokens as supply and why don't site like coimarketcap which is listing a lot of scam tokens do a thing about this since they are considered as a reference?
Thank you

Consider this:

The definition of market capitalization has been around even before cryptocurrencies existed. For some reason, some guy/groups started to have their own definition and their own formula then applied it to cryptocurrencies.

There shouldn't be a market cap that only applies to stocks and only to cryptos. Between the two, I would stick to the definition I shared. You can't say that I am wrong or confused too just because some new guy said that is how crypto marketcap should be computed.

what's the problem with the linked post? he's explaining why altcoin developers create large coin supplies but withhold most of it from the market. he's correct---it's to inflate the market cap and improve their ranking on coinmarketcap.com.


it's a very arbitrary measure for the value of a cryptocurrency because it can be completely inflated by high circulating supply. that's the only reason why coins like XRP and USDT are in the top 10 by market cap. they have huge circulating supplies in the billions.

The formula of multiplying total share or coins are not applied any of the coins' mcap in CMC. I have checked a few of the top 10 listed coins like ETH and other, each coin has used the circulating supply for calculating the mcap, you can check yourself.
There's a difference between stock mcap and crypto mcap- https://blockgeeks.com/guides/cryptocurrency-market-cap/#Stock_market_cap_vs_Cryptocurrency_market_cap

Let's start with some definition from investopedia