Looks like you forgot a few points in your post there so I went and fixed it up for you.

LOL

Every community thinks it has the answers.

Well, not quite what I was thinking. But the actual thought is difficult to express...

Let's say that the market cap of a coin is the measure of the trust that people collectively have towards the coin. If coin X costs $1, and people A, B, C, and D own it 4, 3, 2, and 1 units respectively, the market cap equals $10. This much money the people are willing to trust to be held in this coin.

If someone, let's say A, decided that his trust towards the coin has increased, and instead of $4, he wants to allocate $5 of his portfolio to the coin, he can go to market and buy more until his position is valued $5.

If the action happens without significant new emission (mining) happening meanwhile, A must buy from either B, C, or D. If one of them (eg. B) has listed a coin for sale at the previous price for whatever reason, A can express his increased trust with no change in market price (it was offset by the actualization of the latent decreased trust of B).

But if no one directly wants to sell their coins, A must bid higher to obtain them. If the others are strict with their decision to trust only $3, $2 and $1, respectively, worth of value to the coin, they sell when their coins exceed that value. In a case where they did just that, the following would happen as a result of one person deciding to trust the coin a little bit more:

- coin market value would increase by 10%
- A would hold 4.55 coins valued at $5
- B would hold 2.73 coins valued at $3
- C would hold 1.82 coins valued at $2
- D would hold 0.91 coins valued at $1
- a total of 0.55 coins have been sold to A for $0.60.

A paid only $0.6 to have his stack valued up $1, and others got free money + their stack is worth the same. Not bad!

In reality people often have more rigid price flexibility in this kind of situations, which means that they don't sell so eagerly. This means that price goes up even quicker, and the pursuit to trust $5 becomes easier.

OK - but the same works both ways. Let everything else be the same (ceteris paribus), but this time A has lost some, 25% to be exact, trust towards the coin, and wants to reflect his lessened trust so that his investment is no more worth $4 but $3. What happens?

Without a coincidence of someone wanting to simultaneously increase trust, A has to push the price down to meet the neutral reaction by the others ("X has come down, so it's good to buy low" - this reflects their willingness to trust the equal amount of $ in the coin regardless of fluctuations).

To reduce A's exposure in the coin to $3, the following happens:

- coin market value would decrease by 10%
- A would hold 3.33 coins valued at $3
- B would hold 3.33 coins valued at $3
- C would hold 2.22 coins valued at $2
- D would hold 1.11 coins valued at $1
- a total of 0.67 coins have been sold by A for $0.60.

I will continue soon, this is messy to explain...

I don't think that's right. Market liquidity doesn't need to be close to issuance, if people are choosing to hold for reasons other than lack of liquidity. Liquidity really only needs to be adequate for each holder or any group of holders operating as a group.

But for those scenarios the relevant quantity is market price,  not market cap.  Or, rather, (size of largest lot considered)*(mean price for sale or purchase of that lot).

The market cap is (market price)*(total issuance); why would total issuance matter, if only a small fraction of it can be traded at that price?

This is completely off-topic but i'll make an exception. IMO the best Satoshy can do with his bitcoins is to create a educational foundation. Give terms and subjects to be teached, and release fraction of funds when someone has a proof that he did it. That would rather fairly distribute the coins around the World. Educational POW

Or even maybe Liquidity and Potential Adjusted Market Cap? Where the Potential is some inverse function of a coin age

Hello rpietila,

                 I've read your OP on different alt's (and rules), since this thread is titled the Altcoin Observer I felt this question was apropos...


I currently hold BC and recently liquidated 33% of my holdings for XMR. I was curious as to why you hold these opinions regarding Blackcoin as I know none of these to be true. I realize this topic is trending towards Monero, but being that you're one of the reasons I have invested more in XMR, I thought I would ask. Thanks for your time.

Regards,

sgi02

Clearly highly intelligent. I've learned a lot from his critical posts. But the idolization of Martin Armstrong is hard to understand or take seriously. If MA could do the things AM thinks he can do, MA would be the wealthiest man in the world. But I hope AM succeeds in his quest to create the ultimate cryptocurrency.

While the site seems reasonable and well researched, I do take issue with some of their characterizations, particularly those with fastmines due to poor difficulty adjustment (litecoin and vertcoin are listed as questionable, with vert still teetering on the edge of extreme caution), while coins like boolberry and monero (which had a private miner supposedly raking in half of all blocks at one period, a fairly extended period for boolberry) or maxcoin (which also had a private miner and then hardforked to change block reward to a smaller amount several months after launch) are listed in acceptably mined currency section.

If you look at the top 10/100/1000 addresses on bitinfocharts.com for vertcoin, it has a far better/broader distribution than namecoin or terracoin (fairly mined currencies according to the site), and the stats aren't available for franko, maxcoin, potcoin, and most of the others listed as fairly mined on bitinfocharts.com, but I suspect since most of them failed to remain popular they are very concentrated amongst a few.

Also, the writer is obviously a proponent of devcoin (which he lists in an even higher category than fairly mined - it is an "ethical" coin) states:
So apparently it's "ethical" to keep 90% of all coins for the foundation to distribute as it pleases, but what amounts to a less than 10% of coins now for vertcoin (and constantly dropping) or less than 1% for litecoin lands them in the questionable category.

I have no issue with blackcoin and other superfast PoW then switch to PoS coins being listed in extreme caution category.