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Ask HN: What is a good way to think about the market cap of a cryptocurrency?

7 points by TekMol ↗ HN
Since Bitcoin forked into Bitcoin and Bitcoin Cash, I have been thinking about cryptocurrencies again.

Bitcoin Cash has a market cap of about 9 billion meanwhile. That's in the same ballpark as for example Porsche.

But what does that mean?

The market cap of a company is pretty easy to explain. It is the expected sum of all future earnings discounted for inflation.

What would be an equivalent way to explain the market cap of a currency?

6 comments

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nhayfield
It's just the total number of coins times the current price per coin.
TekMol
Well, that's like saying the market cap of a company is just the number of shares times the price per share.

But then how would you judge if the price is too high or too low?

I'm pretty sure that currencies have a value in a deeper sense then just "What people pay for it".

neboysa
Actually, very often they don't... Porsche shares, if you wish, are the representation of the public perception of value of their cars, service network, brand, cash in the bank, etc. They are the quantifiable proxy of those values. Cryptocurrencies do not proxy anything. So, the only way to measure their value is by "what people are willing to pay". And that doesn't have to be bad, a-priroi. Its just different thing. So, the cap of crypto _is_ nr of coins time price per coin, where ppc changes heavilly over time. So the "market cap" of crypto is not constant - it changes very rapidly over time. <crypto_name_here> could have a cap in billions today and zero next Thursday. Hence, there isn't much sense in trying to define/measure it.
charsifood
> I'm pretty sure that currencies have a value in a deeper sense then just "What people pay for it".

You should share your ideas.

1123581321
Not really.

If you were able to buy 100% of Porsche, you would be able to sell it again for a similar amount because the business would continue to operate and make money. The value is in the constant stream of customers that give Porsche money in exchange for cars.

If you bought 100% of Bitcoin, you would not be able to sell it for much because the value is in the widespread ownership of Bitcoin and its use/potential use as currency. Just like the 'market cap' (money supply) of USD is a few trillion but only so long as a few hundred million people hold USD.

eminkel
I'd think you need to take into account a few other items such as:

Network Usage (What business segment is using it?) Upcoming Deliverables (Are current issues being resolved, active development?) Features Awareness (Is it in the press? Is press good/bad?)