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What Is the Market Cap and Does It Affect Fantasy Finance?

The post What Is the Market Cap and Does It Affect Fantasy Finance? appeared first on Coinpedia – Fintech & Cryptocurreny News Media| Crypto Guide

The market cap is one of the metrics most overlooked by new traders, but it can offer some valuable insight. It can be scary taking on a new investment, especially if it’s in a new field. There’s a lot to learn and no one wants to risk losing their money on a failed experiment. For …

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The market cap is one of the metrics most overlooked by new traders, but it can offer some valuable insight.

It can be scary taking on a new investment, especially if it’s in a new field. There’s a lot to learn and no one wants to risk losing their money on a failed experiment.

For most of the history of the stock market, the only way to gain any experience was to buy a few stocks and see what happened. Maybe they did well, maybe not. But—hopefully—you learned something along the way. 

Fantasy finance contests are a new way for potential investors to get some practice at reading the markets and making trades without the need for an upfront investment.

Fantasy finance platforms like StockBattle or Investor allow people to learn about things like market caps, short vs long sell, and more.

What Is the Market Cap?

The Market Cap on the Stock Market

The market capitalization index—often simply referred to as the “market cap”—is the total value of all the shares of a particular company that are in the market.

The market cap of a stock is calculated by multiplying the price of that stock (at the most recent market closure) by the number of shares in the market.

What does that mean? Well, as an example, Company X has 200,000 shares of stocks. If each share sells for $50, then the total market cap is one billion USD. 

Here, we see that Amazon has roughly 506 million shares that exist in the market.

https://ycharts.com/companies/AMZN/shares_outstanding

Amazon is currently trading at around $3,370

Multiplying these numbers gives us the total market cap of Amazon – about 1.75 trillion USD.

This can give people a much better idea of how much total value has been put into a company than just looking at the stock’s price.

The Market Cap and Cryptocurrencies

Since there is no “closing bell” for online crypto trading, the market cap is calculated slightly differently.

To get the market cap of a cryptocurrency, all you need to do is multiply the current price by the current circulating supply. So, just like with our Amazon example above, let’s look at the biggest cryptocurrency out there, Bitcoin. 

Here, we can see the price of a single bitcoin as well as the total market cap. Some quick math tells us that there should be about 18 million bitcoins at that rate.

https://coinmarketcap.com/currencies/bitcoin/

Looking here, we can see that that is, in fact, the amount we see.

When we’re talking about market caps, we can split them into three categories based on their size: small, medium, and large. The definitions for these are different based on whether we’re talking about stocks or cryptocurrencies.

Market Cap Sizes for Stocks

Small-Cap

Small-cap companies are defined as having a market cap of between $300 million and $2 billion.

These are usually newer companies that are not yet fully established on the market. Small-cap stocks typically deliver above-average results when looked at as a group over the long term, however, many go belly-up in less than a year.

These are best held as a diversified group for a multi-year investment.

Medium-Cap

Medium-cap stocks have a market cap of between $2 billion and $10 billion These are usually already-established companies whose sector is undergoing a shift or expansion.

Medium-cap stocks include companies like Foot Locker, TripAdvisor, and GameStop. These may be growth stocks but are often less volatile than small-cap stocks. Medium-cap companies are typically established and well-proven in their track records.

Large-Cap

Large-cap stocks are typically nationally recognized brands with a long history of paying dividends. Large-cap stocks include companies like Apple, Amazon, and Coca-Cola.

These stocks represent the pinnacle of stability, however, they often provide limited growth potential.

Market Cap Sizes for Cryptocurrencies

Small-Cap

These currencies have less than $1 billion in market cap. They represent the largest risk as small cryptocurrencies can go belly-up overnight.

However, as seen with coins like DOGE, they can also present rapid, exponential growth. Small-cap investments can be a great choice for long-term investments if you can stomach the short-term volatility.

Medium-Cap

These are cryptocurrencies with a total market cap of between $1 billion and $10 billion. Coins such as XRP, LTC, and BUSD are all medium-cap coins. These typically represent a somewhat safer choice with more long-term potential. This is often a “make or break” point for many coins.

Large-Cap

Cryptocurrencies with more than $10 billion in market cap are said to be “large-cap” currencies. Large-cap cryptocurrencies include BTC and ETH; these represent the most stable choices, however, they do not typically present the chance for short-term gain and can be quite volatile on the day-to-day market.  However, they do continue to trend upward over the long haul. 

Which is Better?

This is a question with no easy answer. Which option is best for anyone depends largely on their wants and needs. For example, a company with a large market cap is more likely to be able to acquire new financing and secure better deals with banks. Further, they are more likely to be able to weather a downturn in the markets or unforeseen changes in the world. 

However, the larger a company becomes, the harder it is for it to make meaningful growth. Sure, Apple stock is going to rise, but will the amount it increases be worth the time and investment in the short-term? Probably not. Since fantasy trading contests typically last anywhere from 15 – 60 minutes, it’s probably best to go for something with a bit more volatility. Medium-cap businesses offer the best value for many short-term choices, but a low-cap stock might just be the next breakout success.

Thanks to its simplicity and effectiveness, the market cap can help you to keep a properly diversified virtual portfolio and help you to determine which stocks or coins you might be interested in.

The market cap can give us a great insight into the overall value of a stock or cryptocurrency.

It reflects the general attitude that investors and the market have in a given commodity with a higher cap being indicative of both public trust and financial stability.

Broadly speaking, a lower market cap will have a lower cost and a higher risk with the potential for a higher return. In fantasy finance contests, these may represent a more appealing choice than many larger businesses.

While the market cap is a pretty quick and easy guide to a stock’s overall value, it’s not the only important metric by which we should be judging stocks.

It is very important to remember that the market cap of a company is not the same as the equity of that company.

The market value of a company is not actually based on the company’s value (assets, debts, etc.) but is only a representation of what people think the company is worth.

Only a truly thorough investigation of the company can tell you what it’s really worth. Shares of any company are often over- or undervalued by the market.

This means that the market price determines only how much the market is willing to pay for its shares, not what they may actually be worth.

The market cap of a stock or coin is largely fairly stable. But that doesn’t mean that it’s set in stone. Any significant change to the price of an individual share will affect the market cap—either up or down.

Likewise, the issuance of stock warrants can affect the market cap by increasing the total number of outstanding shares.

However, the market cap isn’t normally affected by a stock split or dividend. For example, in a 2-for-1 split, the price of a single share will be halved, but there will now be twice as many shares, resulting in the market cap being unchanged.

Although the number of outstanding shares and the stock’s price change, the company’s market cap remains the same. The same applies to dividends.

If a company issues a dividend—thus increasing the number of shares held—its price usually drops, leaving the overall market cap unchanged.

So, now that you know a bit more about how to read the market and pick a stock, why not try your hand at fantasy finance? Fantasy trading contests like StockBattle, Investr, or Wealthbase all offer users the chance to earn real money by putting their expertise to the test.

In just 15 minutes, you can test out your analytical prowess against real-time NASDAQ data by picking a fantasy portfolio of up to five stocks or cryptocurrencies.

All users earn points based on how well they do and can trade these in for real prizes. There’s never been a better way to learn about stocks than by giving a risk-free try yourself.

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Source: https://coinpedia.org/press-release/learn-market-cap-for-better-trading-decisions/

Blockchain

Binance USD (BUSD): A Case Study for Stablecoin Compliance and Security

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Binance USD (BUSD) has become one of the fastest-growing cryptocurrencies in the world, with a variety of use cases and growing demand amid the continued growth of the crypto markets. A key component to BUSD’s success is its unwavering compliance to the world’s most stringent regulatory standards, ensuring safety and security for all of the stablecoin’s users.

Stablecoins have emerged as major players in the crypto market this year, driven by user demand for flexible liquidity in fiat currency terms. These cryptocurrencies, whose market values are pegged to the worth of certain assets like the U.S. dollar, have also been important assets in the growth of decentralized finance (DeFi). There is $120 billion worth of stablecoins in circulation as of September 1, according to CoinMarketCap.

Amid the rise in demand for stablecoins, various segments of the crypto industry have brought up questions about the veracity of the 1:1 peg of major stablecoins to their backing assets, like the U.S. dollar and other fiat currencies. After all, if the issuers of stablecoins are not able to show that each unit of their tokens can be exchanged for the equivalent amount of the backing asset, there will be serious doubts about the credibility of these tokens, resulting in adverse market effects.

Therefore, when Binance launched BUSD with Paxos in 2019, utmost importance was put towards making sure that every unit of the stablecoin can be verifiably backed with U.S. dollars, therefore giving its users peace of mind and giving more credibility to a stablecoin industry beset by trust issues.

BUSD: A Case Study of Stablecoin Compliance and Safety

BUSD is a 1:1 U.S. dollar-backed stablecoin regulated by the New York State Department of Financial Services (NYDFS), issued by Paxos, a regulated blockchain infrastructure platform. Since then, BUSD has emerged as the third-biggest stablecoin in the world, with a market cap now above $12 billion and a user base of about 1.1 million people.

As a result of BUSD becoming the stablecoin of choice for millions of cryptocurrency users, we see a number of characteristics that show the merits of having a stablecoin that has prioritized user safety and compliance to regulatory and public standards.

1. Actual, Audited, and 100% Cash and Cash-Equivalent Reserves

As mentioned above, BUSD is one of few stablecoins in the world backed with actual cash. According to a current reserve report from Paxos, 100% of BUSD’s total market capitalization is backed by cash and cash equivalent reserves.

The issuance of Paxos provides a glimpse of the lengths that Binance has gone to ensure that BUSD is an above-board crypto-financial product. BUSD is one of the few stablecoins that provides monthly audited reports of reserves. Everyone can independently verify at specific points in time that the entire supply of BUSD tokens is consistent with USD in reserve accounts at U.S. banks held and managed by Paxos.

Ultimately, the audits and measures that are implemented to verify BUSD’s asset holdings solve one of the main concerns by regulators regarding the existence of actual reserves that back stablecoins.

2. Regulatory Trust and Insurance

With stringent measures such as the aforementioned monthly audits, BUSD adheres to the highest compliance standards, particularly by NYDFS, regarded as one of the most stringent when it comes to compliance requirements.

Why is having a regulator essential to the stablecoin business?

In August 2020, BUSD became “Greenlisted” by the NYDFS, making it pre-approved for custody and trading by any of the NYDFS’ virtual currency licensees.

Unlike most stablecoins that claim to be compliant, the BUSD business and its issuer Paxos are regulated by NYDFS, This means:

-The value of each stablecoin token is tied directly to the value of the US dollar, and the amount of “reserve” dollars equal or exceed the number of stablecoins outstanding.

-Regulators are overseeing the establishment and maintenance of reserves backing the stablecoins.

-Reserves may only be held in the safest forms, such as FDIC-insured bank accounts and in short-term maturity US Treasury instruments.

-Reserves are fully segregated from corporate assets, specifically for the benefit of token holders, and are held bankruptcy remote pursuant to the New York Banking Law.

Regulatory oversight is important because it assures stablecoin users that the dollars underlying their stablecoins are secure and will be immediately available when they want them. The NYDFS ensures the Trust companies, like Paxos, and their individual tokens are following its strict rules at all times.

3. Growing Use Cases

In less than two years since its debut, BUSD has become one of the fastest-growing cryptocurrencies while featuring a variety of utilities, from trading to lending and payments.

Stablecoins like BUSD play a critical role in the world of decentralization and in providing a solid foundation for the continued growth of DeFi (decentralized finance). BUSD is widely used in Binance Smart Chain (BSC) and Ethereum when it comes to trading, lending, and other scenarios. According to the BSC Project, there are currently more than 400 decentralized applications that support BUSD. On April 21, 2021, the single-day transfer amount of BUSD reached a peak of $261 billion, across 737,000 transactions on BSC.

The combination of ample regulatory compliance, trading volumes, and user interest in BUSD presents a case where private-driven financial innovation via blockchain technology can be pursued while staying compliant with user protection mandates stipulated by the world’s top regulators.

Why Strive for Compliance?

The rise in stablecoins has sparked discussions by regulators regarding the challenges they potentially pose to money markets. Making sure that each unit of a stablecoin can be exchanged for an equivalent unit of its backing asset is a matter of public interest, because deficiencies related to that characteristic can lead to general mistrust in the crypto markets. In the long term, the overall cryptocurrency industry suffers if these concerns aren’t addressed.

With BUSD’s emphasis on compliance, we can safeguard the trust of both users and regulators in stablecoins, while opening opportunities for the private and public sectors to cooperate in establishing stablecoins as an important asset class in the global economy. When more stakeholders show acceptance to stablecoins, particularly trusted ones like BUSD, more avenues for growth opportunities open up.

Ultimately, it takes global cooperation to realize crypto mass adoption, and therefore a better global financial framework. At Binance, we believe in facilitating this in a healthy way, through proactively collaborating with local regulators and leading the industry to a common destination: to benefit and protect users. In a recent virtual press conference, Binance CEO Changpeng “CZ” Zhao said, “Our view is that it’s great for the regulators to be coming in… to get to 10%, 20%, 80%, 99% [crypto] adoption.”

Therefore, it is important for us to maintain BUSD’s status as one of the world’s safest and most compliant stablecoins, for the sake of long-term progress in the industry.


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Source: https://news.bitcoin.com/binance-usd-busd-a-case-study-for-stablecoin-compliance-and-security/

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XRP Lawsuit: XRP Holders approach the court regarding the expert discovery extension dispute

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The latest development in the XRP lawsuit saw Attorney Deaton write to Judge Torres on behalf of Movants (XRP Holders) to consider the community’s “meaningful perspective” to aid the Court in “reach[ing] a proper decision” in Expert discovery deadline extension dispute. The letter noted that while the court formerly denied Movants’ Motion to Intervene in lieu of SEC’s argument that it will “hopelessly delay” the final verdict, the plaintiff now itself is appealing for a two-months delay with the extension.

XRP Holders appeal access to their funds

Deaton’s letter also refers to Ripple’s opposition to the commission’s expert discovery deadline extension request. According to the letter, Ripple’s argument regarding the “freezing” of XRP markets within the United States impacts Ripple, however, it also directly impacts the XRP holders. Deaton cited Ripple’s argument that “nearly every digital asset exchange in the United States” has de-listed or suspended trading of XRP, leaving XRP holders helpless.

Furthermore, a large sum of XRP Holders holds XRP in retirement brokerage accounts, which have also been “frozen” because of the SEC’s claims, alleging XRP to be an unregistered security. XRP holders are unable to touch their funds in any manner, including the inability to withdraw, due to the ongoing lawsuit.

“The lack of liquidity within the United States, coupled with the mass de-listings prevents XRP Holders from trading, selling, transferring, or converting their XRP. It is because of this de facto in place seizure of their property that XRP Holders took the extraordinary step to seek intervention as defendants… Any delay in the underlying action marks yet another day XRP Holders do not have access to their funds.”

Ripple opposition letter mentions frozen XRP markets

Following the SEC’s letter seeking a two-month extension of the Court-ordered expert discovery deadline, Ripple filed an opposition letter on October 18, requesting the court to deny SEC’s extension appeal to prevent further delay in the final verdict. Ripple asserted that extending expert discovery to January 2022 will “unduly prejudice” Ripple and continue to “freeze” XRP markets in the United States.

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The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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Source: https://coingape.com/xrp-lawsuit-xrp-holders-approach-the-court-regarding-the-expert-discovery-extension-dispute/

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MDT announces data oracle for bridging capital market and DeFi

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The oracle will allow developers in the decentralised finance sector to securely integrate off-chain trading data

Decentralized data exchange network Measurable Data Token (MDT) has unveiled a financial data oracle set to bridge traditional finance and decentralised finance (DeFi).

The blockchain-based service is dubbed Measurable Finance (MeFi) and will offer the secure connection developers need when accessing external data for use on-chain, the platform said in a press release.

With the MeFi in place, the blockchain community can safely navigate between smart contracts and traditional finance markets, with functionality enabled for Ethereum and via testnets.

The MeFi interface will allow developers to source reliable, real-time trading data from across the markets, including from global exchanges such as the New York Stock Exchange (NYSE), the Hong Kong Stock Exchange (HKEX) and Nasdaq.

Why are oracles important?

Oracles offer a decentralised network through which blockchain users can access real-world data and connect it to smart contracts on the blockchain. Growth within the crypto sector continues to see more and more data come on-chain.

To ensure security and authenticity, oracles such as MeFi and those accessed via Chainlink (LINK), among other networks, are proving very essential to developers.

For MDT, the main target is to bring decentralised data-sharing services to the marketplace. Once the ecosystem is in place, the team hopes its usage in DeFi will help projects achieve mainstream adoption.

MDT also wants to explore the possibility of giving decentralised application (dApps) developers access to key data such as financial earnings reports, derivatives and exchange-traded funds (ETFs).

Data is like the superpower in the capital markets. If DeFi is to go mainstream, DeFi innovations and Dapps have to connect with the external context,” MDT co-founder Heatherm Huang said in a statement.

According to him, the platform’s MeFi service is like “Bloomberg on blockchain“, with its top-notch security protocols making it easy for users to toggle between on-chain smart contracts and off-chain capital markets.

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Source: https://coinjournal.net/news/mdt-announces-data-oracle-for-bridging-capital-market-and-defi/

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