PSA: Market Cap does not reflect how many dollars enter or leave the market.


I have been reading so many conspiracy theories about USDT and most involve a fundamental misunderstanding of market cap. Rising market cap does not mean dollars enter the market and falling market cap does not mean dollars are leaving the market. Here is a very simple example to illustrate why:
If for some reason EVERYONE woke up and wanted to get rid of their BTC (but NO ONE wanted to buy), the price would begin to drop as traders undercut each other and the market cap would go down. However, no money has left or entered the market.
Market cap simply reflects the cost of buying the entire token supply at current market value. It does not tell you about money entering or leaving the system.

submitted by /u/WalterMagnum
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Written by /u/WalterMagnum @ January 29, 2018 /u/WalterMagnum

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