Some interesting Sunday readings about cryptocurrency.

Is it a bubble? Differences and similarities between cryptocurrencies and financial markets.

  • Why ICO are securities (and as such should be regulated)
  • We are in a bubble but unlike the dot com bubble this time around most investors are retail investors and not institutions
  • Why regulations are welcome
  • ICO 2.0, the future - good ICOs with good products will give token holders equity-like rights and fulfill regulations

Read more: https://medium.com/@dennyk/why-and-how-the-cryptobubble-will-burst-de9bc7fc5332

From the same author, an explanation of market cap and why the real crypto market cap is much larger than people think.

Market cap(italization) is defined as the value of all outstanding shares in a company, or in another words, the current prize per share times the number of shares.

Ex. Apple is currently trading at $175 per share and has 5.13 shares outstanding. Hence, its market cap is around $900bn.

There’s an important distinction: “free float” market cap vs total market cap. Market cap is the value of total number of issued shares, while free float market cap is only shares are only those that are not held by a major shareholder. Consequently, multiplying the number of free float shares by price we obtain the free float market cap. Using Apple as an example again, around 91% of Apple shares are considered free float, while 9% are considered “stagnant shares”, shares that are held by funds like Berkshire Hathaway or Blackrock, or employees.

There’s no technical distinction between free float and stagnant shares and nothing prevents a large shareholder to sell their shares but as they haven’t done it in a while their shares are considered stagnant.

When people quote a crypto market cap they often refer to the “circulating supply” for that particular coin, and not the total market cap. Circulating supply is similar to the “free float” market cap and thus smaller than market cap. According to the author, by considering the total market cap we get a much better picture of how crypto markets compare to the financial market at the time of the dot com bubble.