The Bitcoin Domain (BTC) is always one of the first pieces of information to be displayed on cryptosorting websites such as Coin360 and CoinMarketCap. Although it seems like a simple, consolidated metric, there’s an argument that the indicator of how the market is distributed makes less sense as time goes by.
One point to note is the staggering growth of the stablecoin industry. Given that Tether (USDT) and USD Coin (USDC) saw their market capitalization explode over the past year, should they also be included in the same ‚domain‘ classifications?
Cashiers and casinos used for money laundering with crypto-currencies?
Regardless of the answer, crypto investors should understand that simply observing BTC’s dominance to decide whether or not to change their allocations to altcoins within their portfolio became somewhat less effective.
The problem of free floating
Simplicity is probably the main reason for the popularity behind the market capitalization metric. Even new investors in the game can understand that multiplying the price of the last trade by the number of coins in circulation allows you to see the total market capitalization. The same reasoning works for stocks, mutual funds, ETFs and most commercial assets.
The problem comes when the amount traded regularly is very small compared to the capital remaining. Some of the most relevant stock indices in the world are based on the concept of free floating.
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This adjustment is made to avoid the distortion caused by inflated market capitalization and works by ignoring stocks that cannot move freely. Shares or currencies that cannot move freely are usually the result of lock-in periods or a shareholder agreement.
In traditional markets, free floating is used by the S&P 500, Nasdaq-100, CAC 40, DAX, HSI and the FTSE-100. Therefore, the market capitalization of each company is adjusted by the percentage of shares freely available for trading.
Crypts still lack transparency
Although information on the public availability of shares may be readily available due to filings with the U.S. Securities and Exchange Commission (SEC), there is no similar rule for cryptomonies. Anyone could easily check how many Bitcoins have been sent to their Genesis addresses. Those coins aren’t expendable, but this isn’t the case for all cryptosystems.
As Cointelegraph reported, Bitcoin holdings under Grayscale’s mutual funds are also blocked. GBTC and similar funds currently have no established retirement programs, which means there’s no way for an investor to take over the underlying BTC asset.
Other than the simplest cases, one can only infer how many Iq Option have been lost over the years. Studies have shown that up to four million Bitcoins are lost forever, including the million attributed to Satoshi mining.
The problem of free floating is even greater in bifurcated cryptosystems. Bitcoin Cash (BCH), for example, has a third of its supply that’s never been touched.