3 ms·

As said by others, market cap is not enough. There needs to be a better metric that takes in to account "true" market depth. I say "true" b/c the market depth o

As said by others, market cap is not enough. There needs to be a better metric that takes in to account "true" market depth. I say "true" b/c the market depth on CC exchanges is generally accepted to be BS due to widespread spoofing/wash trading. Basically, the total market value of the coin should be the maximum USD (or any other reference currency) that could be extracted by continuously selling (an unbounded amount) of the coin until the price approaches 0.

candiodari 9y ago
Really ? Why ? The price for any good is the marginal price. Essentially it's the price that should get paid for having a "single item" of the good change hands. Take a stock. MS stock may be quoted at 80$, but I guarantee that if you want 50% of MS stock, you'll have to pay more than 80$ per share. So prices for large or much smaller quantities of the good change hands are different, and are not quoted unless required. (smaller than one would be still one, but only selling after the seller has to wait a long time). Since such transactions often substantially change the demand for the good, the fact that such a transaction exists often substantially changes the price. This is true for cryptocurrencies, stocks, cars, shavers, toilet paper.
- hendzen 9y ago
  The point is that marginal price is easily manipulated, when the good is easily electronically traded. Stock trading is heavily regulated (& companies can issue more shares if demand is very high) which prevents the massive amount of manipulation we see in the CC space. Shavers/cars/toilet paper have higher transaction costs and aren't typically seen as assets with which to speculate. This manipulation makes the marginal price a potentially bad way of ranking different assets, especially when the market depth of the asset is relatively thin (i.e. on many CCs). The point of the metric I gave was that it is more robust of a measure to manipulation than market cap. What do you think is the "value under liquidation" [0] (VuL) of XRP? BTC? probably significantly less than the market cap. The more interesting thing to do would be to try to estimate it for different cryptocurrencies and compare them (i.e. XRP vs ETH). That would be fairly difficult though, but perhaps an upper bound could be estimated, better than the trivial upper bound of market cap which assumes that the market impact of selling is 0. [0] - https://cims.nyu.edu/~almgren/papers/optliq_r.pdf https://cims.nyu.edu/~almgren/papers/optliq_r.pdf
  - candiodari 9y ago
    > The point of the metric I gave was that it is more robust of a measure to manipulation than market cap. What do you think is the "value under liquidation" [0] The market cap of Google is 780 billion. The value under liquidation of Google is (you can find this in their financial reports) ~100 billion. Even that is a vast overestimation of what it would fetch in a firesale, because it's assuming, for example, that with Google firesaling, the ad "inventory" would sell for what it's currently selling for. (There another 70 billion in "intangibles" (guess how much that fetches in a firesale)). Granted that's pretty high (a company that pays dividends, like Microsoft, it'd be way less, and for insane stocks like Amazon ... let's not go there). Which do you think reflects the value of Google ? It's an interesting question, and you can if you like get a bachelor, masters or PhD in various ways to answer that question. But I would say there is no one good answer. Not for XRP, BTC, or for Google, not even for things like the US Dollar.

candiodari 9y ago

Really ? Why ? The price for any good is the marginal price. Essentially it's the price that should get paid for having a "single item" of the good change hands. Take a stock. MS stock may be quoted at 80$, but I guarantee that if you want 50% of MS stock, you'll have to pay more than 80$ per share. So prices for large or much smaller quantities of the good change hands are different, and are not quoted unless required. (smaller than one would be still one, but only selling after the seller has to wait a long time). Since such transactions often substantially change the demand for the good, the fact that such a transaction exists often substantially changes the price. This is true for cryptocurrencies, stocks, cars, shavers, toilet paper.

hendzen 9y ago
The point is that marginal price is easily manipulated, when the good is easily electronically traded. Stock trading is heavily regulated (& companies can issue more shares if demand is very high) which prevents the massive amount of manipulation we see in the CC space. Shavers/cars/toilet paper have higher transaction costs and aren't typically seen as assets with which to speculate. This manipulation makes the marginal price a potentially bad way of ranking different assets, especially when the market depth of the asset is relatively thin (i.e. on many CCs). The point of the metric I gave was that it is more robust of a measure to manipulation than market cap. What do you think is the "value under liquidation" [0] (VuL) of XRP? BTC? probably significantly less than the market cap. The more interesting thing to do would be to try to estimate it for different cryptocurrencies and compare them (i.e. XRP vs ETH). That would be fairly difficult though, but perhaps an upper bound could be estimated, better than the trivial upper bound of market cap which assumes that the market impact of selling is 0. [0] - https://cims.nyu.edu/~almgren/papers/optliq_r.pdf https://cims.nyu.edu/~almgren/papers/optliq_r.pdf
- candiodari 9y ago
  > The point of the metric I gave was that it is more robust of a measure to manipulation than market cap. What do you think is the "value under liquidation" [0] The market cap of Google is 780 billion. The value under liquidation of Google is (you can find this in their financial reports) ~100 billion. Even that is a vast overestimation of what it would fetch in a firesale, because it's assuming, for example, that with Google firesaling, the ad "inventory" would sell for what it's currently selling for. (There another 70 billion in "intangibles" (guess how much that fetches in a firesale)). Granted that's pretty high (a company that pays dividends, like Microsoft, it'd be way less, and for insane stocks like Amazon ... let's not go there). Which do you think reflects the value of Google ? It's an interesting question, and you can if you like get a bachelor, masters or PhD in various ways to answer that question. But I would say there is no one good answer. Not for XRP, BTC, or for Google, not even for things like the US Dollar.