Analyzing Cryptocurrency by Using Market Cap

in #actnearn2 years ago (edited)



If you want to know how to assess and analyze the virtual currency based on the Marketcap, volume supply, and supply that has been circulating, below I will explain a few things that may be useful to you.



Market Cap

The marketcap of a coin is the total sum of the value of all coins already circulating and this is one of the tables used to determine the value. The general market calculation is the last trading price, or the average trading price, with the total supply of coins in circulation. For example, Steem, when Steem trades at $10,000, multiplied by the total supply of 16.4 million coins, generates a marketcap worth $164 billion. However, this does not consider the trades that occur in inter-individual transactions.

On websites like CoinMarketCap, the average price is determined at the average price of various markets where trading activities take place. But sometimes there is a big problem that even though Marketcap can provide an overview of the latest value of Steem, Marketcap can also be very easily manipulated with the tricks * wash the trade *

The trade wash is when two parties do trading among themselves to make it as if the price movement occurs. For example, let's say we have a coin with a supply amount of 1 million coins and we sell to Investor coins for $5. Means the market is $5 million. Then the coin Investor sold back to us 0.5 coins for $5.

Means the marketcap is now up doubling. If we sell again to investors coin 0.25 coin for $5 means Marketcap now is $20 million. So, in these three transactions, we can increase the MARKETCAP by 400%. Although this is illegal in other markets because it is price manipulation, in the cryptocurrency market it is a commonplace thing that is widely done by traders.

This is important because if we can make a big expectation and market movement, a beginner will likely buy the coin because it thinks that the price of the coin is likely to be high movement when we can Sell those coins when the price rises 400%. Then the beginners will hold the coin at a price that is much higher than the actual market value.

So, when analyzing the market cap as a formula, professional traders will notice a sign to ensure that wash trading is not being used to be the calculation factor of a cryptocurrency marketcap.


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