Market Cap


Hello everyone. Let’s get started
Today’s short video will again be about market capitalization or Market cap as it’s usually called
I will show how basically any price is possible in the crypto area
first off
this is no financial advice and I have no financial interests
let us first take a look at how market cap is calculated
the formula for market cap is price times circulating supply
so we basically have 2 variables
the price
and the circulating supply
now the circulating supply let’s go with the full in the end available supply
in terms of XRP that’ll be a 100 billion
in terms of Bitcoin it’ll be maximum 21 million coins
and my own created iPinky coin has a 100 trillion coins
now how is the price determined
it’s determined through executing trades on an exchange
we have a bid and an ask order book
for people who want to buy
are the bids
and for people who want to sell are the asks
because the ask for a price of their crypto currency they want to sell
as soon as there is a match between bid and ask
it’ll create a trade
and the price of that trade
will determine the last price of the crypto currency traded
even though we can see in the market history
the total amounts of units being exchanged
it is not necessary for the price
let’s come back to the formula
so market cap is calculated by the price times the circulating supply
we know now
how circulating supply is derived
we assume the total at any time available maximum supply
just to be sure we have the highest number
and the price we just have seen
is determined by the last trade of a crypto currency
and the amount, how many of that crypto currency has been traded
is unimportant
now let’s assume
XRP is at 1$
if I buy 1 XRP
while I see that the price will rising soon
for 2$
I will for 2$
the 2$ that I pay for that 1 XRP
I will basically increase the market cap from a 100 billion
to 200 billion
yet, only 2 new $ came into the market
and this is very crucial to understand
market cap has no relation to the new money inflow
and because there is no relation
I can pay a 1000 $
for an XRP, for one single XRP
which will give us an inflow of a 1000 $
into the market
yet the market cap will be a 1000 times higher
than it was at a 1 $

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