Author [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] Topic: Heres what happened to Ethercoin - or why market cap is meaningless  (Read 411 times)

0 Members and 1 Guest are viewing this topic.

Offline monsterer


Prior to yesterdays 'event', the orderbook on bitrex (the only exchange trading ethercoin) looked like this:


Code: [Select]
bids                       asks
0.00020    20              0.00030       15
0.00010    10              0.00035       20
0.00005    200             0.08          100

'Market cap' was 0.00030 BTC x 1000000 = 0.15 USD x 1,000,000 = $150,000

This figure is just the best price X coin supply and ignores the fact that the buy side of the book only contains 0.015 BTC.

Then, some fat fingered trader comes along and places a market buy order of value 0.0115 BTC, which eats into the sell side of the book, leaving it looking like this:

Code: [Select]
bids                       asks
0.00020    20              0.08             100
0.00010    10             
0.00005    200     

Now, the 'market cap' becomes 0.08 BTC X 1000000 = 30 USD x 1,000,000 = $30,000,000

So, 'market cap' increased by 200 times, and yet there was only a buy order of roughly $4.

The mistake here is the market cap valuation using the best price. In markets that are this lacking in liquidity (like all cryptocurrency markets are), it is totally meaningless to calculate the market cap like this. To do it right, you need to clear the available supply against the buy side of the orderbook, aggregated for all market places.

note: these orderbook examples and trade sizes were simplified for illustration purposes.

Cheers, Paul.
« Last Edit: November 19, 2014, 09:53:57 AM by monsterer »
My opinions do not represent those of metaexchange unless explicitly stated.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline fuzzy

Re: Heres what happened to Ethercoin - or why market cap is meaningless
« Reply #1 on: November 19, 2014, 11:34:00 AM »
So they are only traded on one exchange and have a very limited number of individuals trading it.  Seems
It's only because the volume is $1,400.. not hard to manipulate  8)
is correct. 

So all this lends more credence to what I'm saying (that it could be intentional manipulation).  What we need to find out is:  WHO owns these coins currently being traded and are they trading them between a very limited number of accounts?  It seems this could be the case...

But when you get on coinmarketcap and these are the measurements used to put yourself into the top 4 (oddly just enough to displace bitshares), we need to start considering reaching out to coinmarketcap to start a discussion on giving them a more robust means of rating the top coins.  As made obvious by Ripple, Doge and now Ethercoin (are there any others?) this way of evaluating the top coins is very misleading and prone to manipulation (i.e. conspiracy to make something look one way when it isn't). 

Could it be a fat fingered trader?  Definitely.  I have done it myself before!  However, it could be something else...and even if it isn't, we can do better than coinmarketcap as an indicator of value. 

Remember...YOU might not think marketcap matters to evaluate the value of coins, but that doesn't mean other, less eloquent buyers do not fall for the trap.  Manipulate people's behavior and you can manipulate markets.  The best way to manipulate people's behavior is through greed, lust, fear, starvation...and love (though I'd argue love does not manipulate). 
BROWNIE==DKP; BitShares is our Community! 
ShareBits Welcome to  the Sharing Economy w/ BeyondBitcoin.org Partners--ShareBits.io & OpenLedger.info
TIP FORMAT: #sharebits "ForumHandleInQuotes" Quanity Token_Name

Offline monsterer

Re: Heres what happened to Ethercoin - or why market cap is meaningless
« Reply #2 on: November 19, 2014, 11:39:40 AM »
we need to start considering reaching out to coinmarketcap to start a discussion on giving them a more robust means of rating the top coins. 

I've sent them a support request about it the other day, but it can't hurt for more people to do the same thing. You're right, it does give a pretty false impression to the casual observer.

https://docs.google.com/forms/d/1IZf5cBivam_93zENT_arFFuvWDidHGjWxoTMVmFSoWg/viewform

FYI - the single line of text input is all you get for your support request!
My opinions do not represent those of metaexchange unless explicitly stated.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline fuzzy

Re: Heres what happened to Ethercoin - or why market cap is meaningless
« Reply #3 on: November 19, 2014, 11:59:31 AM »
we need to start considering reaching out to coinmarketcap to start a discussion on giving them a more robust means of rating the top coins. 

I've sent them a support request about it the other day, but it can't hurt for more people to do the same thing. You're right, it does give a pretty false impression to the casual observer.

https://docs.google.com/forms/d/1IZf5cBivam_93zENT_arFFuvWDidHGjWxoTMVmFSoWg/viewform

FYI - the single line of text input is all you get for your support request!

ridiculous...
BROWNIE==DKP; BitShares is our Community! 
ShareBits Welcome to  the Sharing Economy w/ BeyondBitcoin.org Partners--ShareBits.io & OpenLedger.info
TIP FORMAT: #sharebits "ForumHandleInQuotes" Quanity Token_Name

 

Google+