Market Cap Explained
We hear a lot of people and ‘’‘traders’’’ referring to billions (usually 10s or 100s of billions) lost and leaving the market in a matter of minutes/hours.
Many of you use coinmarketcap (CMC) to find these stats.
What we are actually seeing is the Market Value of the entire market decreasing. This ‘market value’ is obviously worked out on a per coin basis.
What is a MarketCap?
The marketcap is the current trading price of a coin multiplied by the circulating supply.
( This SHOULD be the Total Supply of the coin if done in the way of traditional stocks. However, for some most bizarre reason, coinmarketcap work this out on CIRCULATING supply only )
Example of How CMC work out the market cap of a coin :
if Bitcoin has a ‘circulating supply’ of 16.8M Coins and a current trading price of ~$11.5K.
16,800,000 X 11,500 = ~$193.2B market cap)
To see how much truly has left the entire market you need to look at the Trading Volume per coin.
Simple Equation
Coin Circulating Supply X Current Coin Value = MarketCap
Trading Volume is More Important
Trading Volume is usually measured over a period of 24 hours, the trading volume tells you how much money has gone in/out of that market. It may only take $4b - $5b to leave the market to push bitcoin's marketcap down $30b - $40b.
Why? for every dollar that leaves the market another dollar has to enter the market as no sale can be made without a buyer.
Remember - Your coins are only worth what someone else is willing to pay for them. No matter what anyone tells you, this game is all about Supply vs Demand. The price of any coin is just the equilibrium of supply and demand.