Crypto Market Cap is Lying to You

Welcome, welcome to One Minute Crypto! I'm your host, and today I want to explain why the total market capitalization, or "market cap" of a cryptocurrency, can be pretty deceiving. I've heard people say things like, "50 billion dollars just left the bitcoin economy," just because the market cap fell by that amount, and that kind of logic is simply wrong. The market cap of a coin DOESN'T tell you about how much money is entering or leaving the ecosystem, and in this video, I'll explain why.But first, I'm excited to let you know that this episode is proudly sponsored by KeepKey, an easy-to-use hardware wallet for safely storing a huge variety of cryptocurrency. Enjoy peace of mind and pick one up today at KeepKey.com. So it's pretty simple to calculate the market cap of a coin: just multiply the current price by the number of coins in existance. Take bitcoin, for example. At the time of this recording, the price is about $14,000 for one coin, and the total supply is approaching 17 million coins.Multiply those two numbers to get $238 billion dollars, which is the total market cap. But then, it's not so simple to tell what to do with that number, and here's why. You simply can't tell how much of the supply is available for trading, how much is in long-term storage, and how much is simply lost. For example, nearly all the coins mined in the first year of bitcoin's existence, back in 2009, are still in their original addresses. We can see that on the blockchain. It's generally believed that many of these coins are owned by Satoshi Nakamoto, the anonymous inventor of bitcoin. But there's no way to tell if he will someday use them, or the private keys may even be lost forever! If they are lost, then they really aren't a part of the supply, so maybe the official market cap shouldn't include them, but it's impossible to know for sure. Also, when the market cap moves, it's hard to tell what that really means. For example, imagine a crypto that has 100 coins, and I own all of them.What's the market cap? Well it doesn't really have one, because there is no market price. But then I sell you a coin for $5. Now the market cap is $5 times 100 coins, for a $500 market cap. But if you turn around and sell that coin for $2 to your friend, that reduces the market cap down to $200, even though only $2 changed hands! As you can see, the 99 coins that are not available for trade are really what's impacting the market cap here. And if I had 999 coins hidden away instead, the market cap would be jumping around like crazy. I hope this helps you to understand a little more about what's going on behind the scenes, the next time somebody tells you that billions and billions of dollars are entering or leaving a specific crypto.Now you know, it's just not that simple. If you have any questions,

As found on Youtube

---

Posted from my blog with SteemPress : http://cryptocollecta.com/crypto-market-cap-is-lying-to-you/

---