the market capitalization is one of the most recited metrics when it comes to the evaluation of a crypto-currency like Bitcoin. However, a closer look shows that this measure is without.
By Alex Roos
4. December 2018 share Facebook Twitter LinkedIn xing mail
, You know the following: browsers and at first, the market capitalization of crypto-currencies. Finally, the market capitalization of the pages have experienced in the last few years, at least as big a Boom as the listed crypto-currencies. What’s behind it?
Why is there a market capitalisation for crypto-currencies?
The colorful world of Kryptos is difficult to follow and even harder to find it, the developments to be classified. From the equity world, there is the metric of market capitalization. This is calculated on the number of shares issued multiplied by the price of a single share. The bottom line is you can get in this formula, the market capitalization of the respective company.
According to the market capitalisation of a crypto-currency. You take the number of issued Coins and multiply this with the current price of the Coins. So a ranking of Cryptocurrencies is relatively easy to create. At first glance, is to see that Bitcoin is the top. One gets the impression of order in the Wild West of crypto-currencies.
Alex Roos and Dr. Philipp Giese Where the Problem is the market capitalization?
The market capitalization, as calculated currencies are, unfortunately, no in-depth insights into the world of Crypto. The metric can be manipulated in several Ways. For Illustration, a thought example can help: let us imagine that we create an ERC-20 tokens of a fixed token amount directly to the beginning of the so-called MarketCapCoin. There are a total of 10.000.000 marketcap coins. I sell a Token for a Euro on the unsuspecting neighbors, had my Token according to the above formula, a MarketCap of 10 million euros.
Here it is quickly obvious that market capitalization is a fictitious value, and nothing of the capital invested or the quality of the crypto-currency testifies. What are the other difficulties in this measure, and which metrics would be better, you can find it in BTC-ECHO Podcast.
show notes The Nonsense of MarketCap Transaction count is an inferior measure Visions of Bitcoin Visions of Ether Bitcoin Narrative: What do people see in Bitcoin? CoinMarketCap Hodl Waves
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