Why is market cap such an important matter in the crypto space?
In regular stock markets, it allows investors to understand the relative size of one company versus another. Market cap measures how much a company is worth on the open and regulated market, as well as the market’s perception of its future prospects, because it reflects how much investors are willing to pay for a specific stock.
Due to the dominance of websites like CoinMarketCap, traditional financial metrics as a “market cap” have been used to analyze crypto networks and token projects. While market cap is usually a useful metric for tracking the total valuation of a company on the stock markets, the cryptocurrencies space is different. Indeed, most of the time, the calculation method for a coin market cap — simply the number of coins multiplied by the current price in US dollars — are neither transparent nor relevant for several reasons including inflation schedules, true circulating supply, illiquidity Impact and most of all, opaque decentralized multi-dealer structure.
Crypto markets are more similar to Forex than Stock markets. In our opinion, we need to mainly highlight accurate volumes and price instead of market cap.
The FX market is the largest financial market but the most misunderstood due to sparsity and the atomicity of data. As well as it is in the crypto space, trading volume is quite unclear due to its decentralized multi-dealer structure, with no central exchange recording volume. Despite the creation of the Continuous Linked Settlement System in 2002, according to the BIS (2016), more than 40% of the total FX market volume is only between dealers. Volume is essential to judge market liquidity, transaction costs, and portfolio risks. It’s nearly impossible to estimate the capacity of a strategy, or the friction for a transaction, or the speed and cost to liquidate a position without knowing the volume profile of the underlying market. Market cap cannot answer to any of these concerns.
With all that in mind, we decided to focus on market operators and traders' needs. We will provide you the best data we are able to collect without empirical economic assumption, projection or inflated figures. With Koinju, you can now access and read the crypto-markets with true transparency, price calculations, and volume aggregations.
Try Koinju soon on: https://koinju.io/
