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Global cryptocurrency “market cap” exceeds “US” currency in circulation

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Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#31

Post by eloff »

60secz wrote: post #21
eloff wrote: post #12

Earlier quoted context omitted.

Why is it meaningless?

Because the value of cryptocurrency is strongly effected by the volume of buy and sell pressure. Market cap implies that a level of liquidity which is likely not present -- it can very difficult to sell large amounts of most crypto without at least temporarily tanking the value.

Market cap doesn't imply liquidity, not for equities either.

A larger market cap might be correlated with more liquidity, but you readily want to look at shares outstanding and average volume to measure liquidity. I don't see why crypto is special here.

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#32

Post by [deleted] »

drdeca wrote: post #26
Black101 wrote: post #7

Earlier quoted context omitted.

> "market cap" assumes infinite demand for your currency no... infinite demand would make market cap infinite also...

The phrasing probably wasn't ideal. I think they meant something different when they said "infinite demand" than what you mean. I think what they mean is that it assumes that the demand curve, uh, I guess goes off to infinity (or just, some extremely large number which can be practically modeled as "infinity") near the current price, meaning, that you could sell arbitrarily large amounts of it without substantially d…

[deleted]

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#33

Post by NovemberWhiskey »

sb057 wrote: post #15
swader999 wrote: post #8

Market cap is a strange way to frame crypto. Would you ever talk about market cap of USD or the pound? Transaction volume, unique addresses, stock to flow are more useful.

Money supply is a functional equivalent of market cap and is a rather common economic measure.

This really just seems like an odd statement to me.

The market cap of just the S&P 500, which is denominated in U.S. dollars, is over $30tn, which is 50% more than the M2 money supply of U.S. dollars.

So, explain to me again how these things should meaningfully be compared?

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#34

Post by Black101 »

drdeca wrote: post #26
Black101 wrote: post #7

Earlier quoted context omitted.

> "market cap" assumes infinite demand for your currency no... infinite demand would make market cap infinite also...

The phrasing probably wasn't ideal. I think they meant something different when they said "infinite demand" than what you mean. I think what they mean is that it assumes that the demand curve, uh, I guess goes off to infinity (or just, some extremely large number which can be practically modeled as "infinity") near the current price, meaning, that you could sell arbitrarily large amounts of it without substantially d…

> The phrasing probably wasn't ideal. I think they meant something different when they said "infinite demand" than what you mean.

I think that I understand what you meant. By infinite, they just mean that there will always be orders on both sides around the current price... but for that to happen, you need to have about the same amount of orders on both sides (the amount of orders don't matter and could be very small).

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#35

Post by wutXthree »

mikeyouse wrote: post #28
eloff wrote: post #12

Earlier quoted context omitted.

Why is it meaningless?

"Market cap" is borrowed from equity - the market cap of Apple for instance is determined by the number of shares of Apple outstanding x their price. But those shares have intrinsic value in that they grant you rights to a proportional amount of Apple's cash flow. If you were to destroy 50% of Apple's shares, the remaining half would be worth twice as much since the present value of Apple's cash flows hasn't changed.…

If you take TRON though, for instance, you are getting a claim on the nearly continuous new TRON production though.

Same for LOOM and quite a few other cryptos.

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#36

Post by wutXthree »

orbifold wrote: post #17
eloff wrote: post #12

Earlier quoted context omitted.

Why is it meaningless?

There are 4.6 bitcoin transactions per second, how many dollar transaction do you think there are per second and what kind of volume of dollars are traded. Also there are different kinds of dollar in circulation, for example M2 is much higher (by a factor of 10) https://fred.stlouisfed.org/series/M2SL .

Bitcoin only represents about half of that "market cap" number though.

Bitcoin Cash and TRON, for instance, process more transactions than Bitcoin pretty regularly now. TRON even processes more transactions than Ethereum.

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#38

Post by AnthonyMouse »

belltaco wrote: post #29
AnthonyMouse wrote: post #25

Earlier quoted context omitted.

But the current market cap of cryptocurrency in gold bars or cheeseburgers is higher than the current market cap of US dollars in gold bars or cheeseburgers, right?

No, because the post only counts cash in circulation, and not USD in bank accounts.

Which is comparing like with like, isn't it? The USD in bank accounts is predominantly borrowed money, i.e. fractional reserve banking. There is more in bank accounts because Alice has $100 on deposit which the bank lends to Bob and credits Bob's account with $100, so now there is $200 in bank accounts but still only $100 in the vault.

Now I want to know if there is anybody doing fractional reserve lending in Bitcoin. Because if that was allowed anywhere it would erode its status as a deflationary currency and reinstitute the power of central banks to create the currency in the form of credits denominated in it at financial institutions.

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#39

Post by drdeca »

Black101 wrote: post #34
drdeca wrote: post #26

Earlier quoted context omitted.

The phrasing probably wasn't ideal. I think they meant something different when they said "infinite demand" than what you mean. I think what they mean is that it assumes that the demand curve, uh, I guess goes off to infinity (or just, some extremely large number which can be practically modeled as "infinity") near the current price, meaning, that you could sell arbitrarily large amounts of it without substantially d…

> The phrasing probably wasn't ideal. I think they meant something different when they said "infinite demand" than what you mean. I think that I understand what you meant. By infinite, they just mean that there will always be orders on both sides around the current price... but for that to happen, you need to have about the same amount of orders on both sides (the amount of orders don't matter and could be very small…

Why would there have to be equal numbers of orders on both sides? If there are more buy orders than sell orders, that doesn't pose an issue for selling at the, --

oh, because weighting the price between the lowest open sell order and the highest open buy order based on how many there are of each? If the range between them is small enough, I think the effect of this can be neglected.

Re: Global cryptocurrency “market cap” exceeds “US” currency in circulation

#40

Post by Black101 »

drdeca wrote: post #39
Black101 wrote: post #34

Earlier quoted context omitted.

> The phrasing probably wasn't ideal. I think they meant something different when they said "infinite demand" than what you mean. I think that I understand what you meant. By infinite, they just mean that there will always be orders on both sides around the current price... but for that to happen, you need to have about the same amount of orders on both sides (the amount of orders don't matter and could be very small…

Why would there have to be equal numbers of orders on both sides? If there are more buy orders than sell orders, that doesn't pose an issue for selling at the, -- oh, because weighting the price between the lowest open sell order and the highest open buy order based on how many there are of each? If the range between them is small enough, I think the effect of this can be neglected.

> Why would there have to be equal numbers of orders on both sides?

I think that it might influence opinions, robots and future orders... and therefore the current price (in the future).

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