Bitcoin’s market capitalization is just a yardstick

Bitcoin’s market capitalization on September 3 was $125.2 billion. The bitcoin price currently stands at USD 7,262, with a total supply of just under 17.25 million bitcoin. But what does this value actually say about the Bitcoin ecosystem and the Bitcoin price? Some thoughts on market capitalization.

Like so much in the bitcoin ecosystem, the term “market capitalization” is borrowed from the financial world. In principle, it is simply explained: it is the value of the equity capital of a stock corporation on the stock exchange. The following formula is used:

Number of shares x share price = market capitalization.

The share price, in turn, is calculated from supply and demand.

A characteristic of market capitalization is that only those shares are taken into account that are in circulation. Shares that a company holds back, for example, are not included in this calculation. The total market capitalization thus ultimately serves as a guideline – the different companies can be compared with each other on the basis of market capitalization.

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From Exchange to Bitcoin: Transfer problems in market capitalization

When the term is transferred to the crypto world, there are now some inconsistencies. First of all (especially Bitcoin) it is not a company, but rather a currency. Consequently, the objects traded are not shares, but digital coins – at least in theory. The total number of coins is also taken as the basis for the market capitalization – by no means only those that can be bought on the market. One thinks here of the large number of unreported cases of bitcoin that are actually circulating. First and foremost, Satoshi Nakamoto’s fortune should be mentioned here – nobody knows exactly how high it is in the end and whether it will ever (and if so, when) be brought back onto the market.

Added to this is the large number of lost private keys – here too there are an uncertain number of coins that are not accessible to the market. Only the bitcoin price is calculated as on the exchange in the interaction of supply and demand. This also shows that this is not fixed anywhere – and can fluctuate greatly from exchange to exchange, for example.

So the Bitcoin price remains what anyone demands for their coins and what anyone else is willing to pay. In its totality, it is possible to roughly compare how much a currency is “worth”. However, it is and remains a reference value – the market capitalization does not correspond to the amount of money invested.

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