3 ms·
No, money supply is a pure count. Money supply is not quoted in terms of trade, it exists purely outside of market behavior. Market cap requires a trade market
by saosebastiao 9y ago
No, money supply is a pure count. Money supply is not quoted in terms of trade, it exists purely outside of market behavior.
Market cap requires a trade market in order for it to be calculated. It is money supply x last trade price. That's why you quote a cryptocurrency's market cap in some other currency, whereas a market cap is quoted in terms of itself.
- JumpCrisscross 9y ago> Money supply is not quoted in terms of trade, it exists purely outside of market behavior FX traders absolutely look at money supply, amongst other things, re-priced into hard currency when considering e.g. foreign-currency debt burdens; local rates, inflation and borrowing conditions; and the monetary policy relative to the internal and export-oriented economy. It's a specialist metric, though.
- saosebastiao 9y agoThe money supply isn't the currency's value. Of course it is a factor in what traders are willing to pay to acquire it...but weather can be as well. Do you conflate the trade balance with the value of a currency too? Market cap is money supply * last trade price. It mathematically can't be analog to money supply, any more than density can be analog to mass.
- JumpCrisscross 9y agoAs in take the outstanding money supply and convert it, at prevailing rates, to U.S. dollars and look at that statistic over time. It’s a crappy metric, but it is useful in limited situations, e.g. when pricing rate or FX swaps. Both market cap and money supply are metrics that sum across the set. In America we can just count dollars, because our unit of account is our currency. For countries with FX sensitivities, however, that sum is less meaningful in domestic currency than as a hard currency value.