Coin supply has nothing to do with price

English Trading
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Friendly reminder to everyone.

Price does not necessarily correlate with coin supply. This may be obvious to most people here but i see this argument far too often in Crypto forums and twitter.

In a crypto market bull run, you can have a coin with a market in the millions, surpass the price of a coin with a supply in the billions.

Price is ultimately the amount that someone is willing to pay for one ADA. Market cap is simply the last price someone was willing to pay multiplied by the total supply. It is useful in displaying the approximate total valuation of a coin but it does not accurately show the amount of cash invested.

Some people disregard the idea of a $100, $1000, or $10,000 ADA simply because the coin supply is in the billions. They often state that there isn’t even enough money in the world to reach that. This is wrong.

A coin with a 100B market does not mean that there is 100B cash invested in it.

For example:
Coin XYZ, with a max supply of 1,000,000 is currently priced at $1.
This means that the current market cap is $1,000,000.
Tomorrow, someone decides that XYZ is a great investment and purchases 1XYZ for $2 from me.
Now, the market cap is $2,000,000 because $2 X 1,000,000supply = $2,000,000
The net cash inflow in XYZ: $2

In conclusion, the fact that cryptos are often sorted in lists by market cap may be a factor that contributes to this misconception, what really counts in this game is quality.
The are 2000 coins but only a handful are true true quality and only a handful will make it. Cardano is showing more and more clear indicators of its potential with every roadmap update and with every move. Its team and their display of hard work are just shy of immaculate and they CH is an incredibly inspiring leader.
Follow the smart money, be the smart money.

Happy trading & hodling

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Coin supply before launch has no effect, but any supply increase/decrease after launch has an affect.

Market cap based on circulating supply is the true and current valuation price of a coin not the individual price, market cap is not affected by supply changes.

And no it is not wrong when people say ADA cannot reach 10.000 USD per coin in current real terms… Market cap must be represented in real value or it cannot be maintained. Because there wont be liquidity for it. Else we could just all print money, and just fantasize it was worth something, and we would all be rich. It doesn’t work that way - money and valuations are not imagery - they are based on supply and demand.

Price of 1 ADA (without looking at supply) tells you nothing its absolutely useless cause you dont know what its valued at when you exchange. Market cap is the only thing that matters to tell you the current price of the token you got it completely backwards.

Your points about the cash inflow is completely irrelevant, cause cash do not flow in… there is no cash to flow in each buyer also had a seller (cash went out) - its all about exchange… of everything. Houses, stocks, bonds, consumer goods, whatever… These are all assets and products we put a value on and that value is its current market cap. If I build a house from scratch I go from 0 to perhaps 250.000 USD valuation. No cash was injected - because wealth is not zero-sum it can be created and destroyed out of thin air… The house represents economic value.

USD are just an intermediary we use to assess valuations of things to efficiency trade with each other. USDs are not wealth, they are claim-checks to wealth. When you earn a dollar, you put in economic energy, the the dollar you earned is to get something of equal economic energy back. If you rip that dollar into pieces, no wealth was lost. You just worked for free.

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I think it helps to keep in mind that market cap is often an estimate of total value based on latest transactions on the markets. As with all estimates and models it does not perfectly describe reality. Supply of coins on the other hand also involves many different aspects of reality and does not fully encompass all of them at once. When supply is limited it creates a positive pressure on value, when supply is abundant it creates a negative pressure on value. Supply can also be modeled on the short term or on the longer term, and it connects with value in different ways as well as in the mechanisms behind inflation and deflation and these are based on a set point in time. Supply and value is also relative to other factors in many more ways. As an example as supply of fiat currency in the world grows as long as value is connected to currencies then supply now is relative less compared with fiat currency. A 100 trillion market might seem unimaginable now but follow some of the growth curves of FIAT currencies and its derivative products and it suddenly does not seem so unrealistic anymore. An interesting (for me) part of of this is aspects of demand, I think continuous pressure on demand over time is a very strong force in driving value and depleting supply (from a psychological standpoint if it is easy to sell at any given time due to continuous demand it is easier to wait to sell unless needed, while a zig zag pattern of demand means you would risk more by waiting to sell) and that is why I am also very interested in how transactions will drive demand and deplete supply and create a psychological “base” for sales of the currency at any given time.

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Yes. This is why any model looking at factors affecting supply and demand correlates with value.
Example: 3 Models To Explain Bitcoin's Market Cap (Cryptocurrency:BTC-USD) | Seeking Alpha
(granted all correlation studies have weaknesses like the 3rd variable problem so we must try to make sure there where no other factors we did not know of causing the correlation)

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Yes though a lot of what you mentioned is again trading speculations, you talk about different phenomenons. But over the long run, non of these matters, it all comes down to proper valuation. The market already has a set valuation for money (intermediary exchange) that cap is unknown and already set, and is moving around all the time. You can only fight for a piece of that pie, any new intermediary exchange format does not create new value, it can just steal from its predecessor if its more efficient.

Because the wealth is the assets and products. Nobody wants USD you want stuff. The same would apply to BTC. Lets say BTC became the new global currency, all it would do is transfer all of the wealth from holders of prev. currencies to the btc holders.

It would not create excess wealth, because btc/money isn’t wealth, it just transfers the claim-checks of stored economic energy.

But the total market cap of monetary assets would remain pretty much the same.

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Yes I agree.

Hmm yes you are right. So basically finding anything that is more efficient and that there is demand for will take value from whatever it is replacing? Will not efficiency in itself be able to cause value? For example more people today are able to use goods because they are more easily produced. More value is spread.

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Yup you’re completely right - al though smaller efficiencies - not where the main value come from. But you are correct and thats why Its an unknown pool, we cant measure this exactly - but yes that is inside the pie of monetary assets and any efficiency increases will create a non-zero sum surplus.

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Well that was kinda an awesome discussion JB. Thanks! Inspired me to understand this subject even more :slight_smile:

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The only thing that matters is adoption. Adoption will bring in the demand needed for the price to rise.
Plain and simple and without so much fluff, higher demand causes higher bidding, in turn causing higher prices, thus causing a higher market cap. That’s it.
Market cap is a great way to measure market share and overqll crypto market value but the reality is that if there is no demand, the price will not go anywhere, no matter the supply count.
A great example of this is ETH vs LTC. While LTC has a much smaller coin supply than ETH, the demand for ETH was much greater during the 2017 bull run, causing its price to rise up to about 3x the price of LTC. The answer will always be adoption.
My point i that people need to stop psychologically blocking themselves thinking that $10 is the limit because it is not. In the very near future, when the right infrastructure highways are built well enough for institutional and other whale investors to enter the space, there will be a massive price pop. This will eventually wake up a lot of bitcoin whale wallets. These whales are going to want to do something with their money, they will look to other investments in the space. By that time, Cardano and other strong projects in this space, some that may not even exist at the moment, they will be well ahead in accomplishing their vision, investors will see more and more value in them and they will dump massive amounts of money in.

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People can’t think exponentially. But you get it :wink:

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it is effect