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What's wrong with it? Seems like a perfectly normal metric for coins just like for stocks and bonds.

snoman 9y ago
I'm just guessing that it's because it's not a stock or a bond. I don't ever hear what the market cap is for the yen, or any other currency.
- ateesdalejr 9y ago
  That's because they can always print more. There's no cap.
  - deleted 9y ago
    [deleted]
  - amarkov 9y ago
    "Cap" doesn't mean what you're thinking in this context :)
  - spraak 9y ago
    That's not what a market cap means. There are cryptocurrencies too that have no limit on the number of produced coins. Market cap means market capitalization.
sgk284 9y ago
Because I can create a cryptocoin with 2B tokens, sell one coin to friend for $100 and have a $200B market cap. It's got nothing to do with reality. Anyone (literally) can create a $200B market cap coin by forking a github repo.
- pedrocr 9y ago
  That's just how market caps work in general. The same argument has been made for startup valuations. It's not a problem with the metric at all and doesn't hold for the case being discussed as actual market based transactions in enough volume are happening. It's not just a made up number. Here's an argument that Facebook was not worth 33B$ in 2010 because only 3% of its value had ever been transacted: https://signalvnoise.com/posts/2585-facebook-is-not-worth-33000000000 https://signalvnoise.com/posts/2585-facebook-is-not-worth-33... It's worth almost 17 times more than that now. Market cap is not a perfect metric because it doesn't capture the depth of the market willing to buy but coins don't make that any different.
  - mitchellberry 9y ago
    No one measures the marketcap of gold or soybeans. When was the last time someone mentioned the marketcap of the USD? It's an absurd metric made worse by the fact that more coins are issued every 5 mins. If price remains the same virtually all coins will go up in marketcap regardless. What company issues new shares every single day?
skewart 9y ago
With stocks, the market cap is the total valuation of the company. Companies can have valuations because they can be bought and sold - either when they're private, like when Google buys a startup, or when they're publicly traded, like when Microsoft bought LinkedIn. The valuation of a company is determined based on its financial performance and, ultimately, by its ability to generate cash for shareholders. (Keep in mind that, unlike cryptocurrencies, companies generate profit for their owners just from their daily operations). That overall valuation drives share price. Equity investors consider how valuable they think a company will be in the future and back into a price they're willing to pay per share from there. Market cap is a meaningless metric for crypto since nobody would ever want to buy all the Bitcoin in the world and hold it for ten years. What would be the point? It won't generate cash flow during those ten years, and it almost certainly won't be worth more in ten years - with one person hoarding all the Bitcoin in the world nobody could use it for any transactions and people would lose interest. Case in point, nobody talks about the market cap for USD or other currencies. It just doesn't make sense for assets that are only valuable as a medium of exchange.

I'm just guessing that it's because it's not a stock or a bond. I don't ever hear what the market cap is for the yen, or any other currency.

ateesdalejr 9y ago
That's because they can always print more. There's no cap.
- deleted 9y ago
  [deleted]
- amarkov 9y ago
  "Cap" doesn't mean what you're thinking in this context :)
- spraak 9y ago
  That's not what a market cap means. There are cryptocurrencies too that have no limit on the number of produced coins. Market cap means market capitalization.

sgk284 9y ago

Because I can create a cryptocoin with 2B tokens, sell one coin to friend for $100 and have a $200B market cap. It's got nothing to do with reality. Anyone (literally) can create a $200B market cap coin by forking a github repo.

pedrocr 9y ago
That's just how market caps work in general. The same argument has been made for startup valuations. It's not a problem with the metric at all and doesn't hold for the case being discussed as actual market based transactions in enough volume are happening. It's not just a made up number. Here's an argument that Facebook was not worth 33B$ in 2010 because only 3% of its value had ever been transacted: https://signalvnoise.com/posts/2585-facebook-is-not-worth-33000000000 https://signalvnoise.com/posts/2585-facebook-is-not-worth-33... It's worth almost 17 times more than that now. Market cap is not a perfect metric because it doesn't capture the depth of the market willing to buy but coins don't make that any different.
- mitchellberry 9y ago
  No one measures the marketcap of gold or soybeans. When was the last time someone mentioned the marketcap of the USD? It's an absurd metric made worse by the fact that more coins are issued every 5 mins. If price remains the same virtually all coins will go up in marketcap regardless. What company issues new shares every single day?

skewart 9y ago

With stocks, the market cap is the total valuation of the company. Companies can have valuations because they can be bought and sold - either when they're private, like when Google buys a startup, or when they're publicly traded, like when Microsoft bought LinkedIn. The valuation of a company is determined based on its financial performance and, ultimately, by its ability to generate cash for shareholders. (Keep in mind that, unlike cryptocurrencies, companies generate profit for their owners just from their daily operations). That overall valuation drives share price. Equity investors consider how valuable they think a company will be in the future and back into a price they're willing to pay per share from there. Market cap is a meaningless metric for crypto since nobody would ever want to buy all the Bitcoin in the world and hold it for ten years. What would be the point? It won't generate cash flow during those ten years, and it almost certainly won't be worth more in ten years - with one person hoarding all the Bitcoin in the world nobody could use it for any transactions and people would lose interest. Case in point, nobody talks about the market cap for USD or other currencies. It just doesn't make sense for assets that are only valuable as a medium of exchange.