Market Cap, What It Means, and Why It Doesn’t Matter

I always see people say a very annoying statement of “Ripple can never be worth more than $5.00 or $10.00 because the market cap would be bigger than any other company in existence”. It’s annoying for a few reasons, one of them being, it’s not Ripple, it’s XRP (2 different things) and, MC (Market Cap is totally irrelevant).

If we look at market caps of other companies, we can look at Saudi Aramco’s oil reserve of 260 billion barrels x today’s price of oil = value of almost $17 Trillion dollars. The Dutch East India Company, adjusted for inflation, would today be worth $7 Trillion dollars. So what, it doesn’t matter.

Market Cap is simply the result of multiplying the total supply of shares (or in this case, coins), by the last price paid, BUT, it doesn’t take into account what price coins were sold for in the past, or, what price coins will be sold for in the future. Price isn’t driven by MC, at all, so MC is merely a tool for ranking digital assets based on the calculation I just provided.

In other words, MC is totally irrelevant. MC isn’t going to be an object providing an area of resistance, preventing a coins’ value from rising. MC isn’t a component of the price of a coin, and, MC really doesn’t even matter when ranking the value of a coin overall, because, guess what, it’s irrelevant.

So what does matter? Essentially, it’s the fundamentals of the company/coin, its’ usage, its’ traded volume, investor sentiment, and its’ demand. There could be other components at play, but these are the ones that really matter. When I say fundamentals, these include the management team, the business plan, the cash reserves held, news, product roadmap, and others.

If we look at what I’ve just mentioned, then we can look more accurately at Market Value, which is totally different. If the price of XRP is increasing, the news is positive, more partners get on board, XRP is mass adopted and used for its’ true purpose, the management team grows, and the product adapts to the times, that’s what drives the value. This is what we should be concerned with as investors in XRP.

For those who still insist MC does matter, then just look at it once XRP has reached its’ full potential and allow yourself to be blown away by the massive number looking back at you.

This brings up another point, with regards to chart TA (technical analysis). TA doesn’t really apply to the crypto market, why, because there are too many fundamentals already in play. TA is something one falls back to when fundamentally there’s nothing happening, and one wants to speculate where price is going. Ask yourself, what blows away any TA you’ve done, faster than anything, it’s news. News, for XRP is something we’re getting hit with almost every day, and, it’s all positive. So TA means nothing at all. You’re descending channel, MACD divergence, etc, all get blown off the chart when Ripple announces that yet again, another central bank is testing xCurrent, or, a central bank is switching to xRapid.

Let’s focus on the things that matter.

Disclaimer: I personally own XRP digital assets and am a long-term investor/holder in the product. I am not a financial advisor and my reports are not intended as any kind of investment or financial advice. They are formed from my own opinions derived from my own research.


Author: Andrew French

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