Where do the billions of $ come from ?

English Trading
#1

Looking at the market capitalisation of cardano on coingecko.org during the recent price surge following Bitcoin’s approaching it’s record high I was surprised to see it make a jump up and down, by roughly one billion USD in a day or two.

I beleived cardano’s maket is not the only market to have seen such big market capitalisation change in a few days (or even hours).

Do you think this is institutional capital moving in and out, or do you beleive it’s just many small un-coordinated folks that happened to make the market move this way?

#2

A thought experiment:
Imagine you are the only person trading ADA during a given timeframe, say 1 hour. During that time, you sell 1 ADA to yourself for 0.32 USD, thus doubling the latest market price and therefore the market capitalisation. Did billions of USD move in or out?

1 Like
#3

Nice experiment. Thank you.

How do you understand the volume traded in 24 h on coingecko again ? What does that represent.
Do you have another experiment to illustrate how a 1 billion of USD has been traded juste for cardano in the last 24h ?

#4

I don’t know how much was traded in the last 24h. The figure on coingecko seems to be the aggregate self-reported volume from many exchanges. Trusting that data would be misguided to say the least as much of it is very likely faked.

Truth is that we don’t even know the real trading volumes for Bitcoin, let alone for smaller coins. Studies estimate that about 95% of Bitcoin trading volume is made up in some way, either by exchanges running bots that trade against themselves or because exchanges are outright lying.

If I had to guess the real trading volume for ADA I would aim at about 1% of what is reported on sites like coingecko. But again, there is no way to know.

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#5

Ok. Then the though experiment could be the following.
Let’s think of coingecko listing just 10 markets where with a few hundred high frequency market maker bot on each. The bots are buy and selling around the minimal spread of each market.

Let’s consider a single bot starting with a buy making the price jump above the minimal market spread. The bot sells right away after its first buy, making the price drop, it buys again … price is up …

Some Markets allow for micro seconds settlements and let say that the bot makes 10 tx / s that’s 600 tx / mn, 36 000 tx / h, that a bit less that 90 000 tx / day.

If on average each transaction is worth 1 that's already a volume of 90 000 in 24/h.
Multiply this by a real number of bots / markets and markets (say 100 x 10 ) we reach the volume range of billions of USD in 24 h ( 900 000 000)