Most important thing to understand in ANY market is how price is determined!
And it is very simple yet many people fail to see its simplicity.
Price is the result of demand and supply. That’s it!
Another always overestimated principle is market cap. Market cap is the total available supply times the current price.
Let me illustrate this with an example:
Say your a farmer and sell 10 apples, each 1$, that’s the supply.
Come 10 hungry people and buy each one apple for 1$, that’s demand. Market cap now is 10$ (10 apples each at 1$)
Comes one more hungry person realizing you, the farmer, has no more apples left to sell. That person is clever and offers 2$ for an apple to any of the first 10 buyers. That’s also demand.
One of the first 10 buyers may be convinced to make a little profit and sells his apple for 2$. That’s supply. Market cap is now 20$ (still 10 apples, last price paid is 2$ now)
So in this market the price for apples is currently at 2$. Everyone knows there is demand, such that an apple can be sold for 2$. Even though market cap is now at 20$ only 2 additional $ came into the market. The farmer still has 10$ and the person selling his apple to the new market participant for 2$ has these 2$. So the total money in the market is 12$. Yet market cap is 20$
Confusing? Yes it is, but if you simply do not pay attention to the market cap figure all will be fine. Market cap is not relevant, not even to compare markets, let me illustrate:
Say another farmer sells oranges, 10 pieces at 1$. Same market as with the apples above.
After all oranges are sold 2 hungry people come, both are clever. The first offers 2$ for an orange and gets it. The second person tries to with 2$, but now everyone is happy already, with either the money or the oranges he has. So the second person increases his offer to 3,4,5$ At 5$ someone may sell his apple to him. Market cap is now: 50$ (10 oranges times 5$), but money in the market is a mere 17$, the 10 the farmer has, the 2 and 5 from the additional market participants.
Now: which market is better? bigger? In this example maybe the oranges market. We could deduce this as both markets have the same supply (10 items). But as soon as a different amount of assets (oranges/apples) is at stake, it is literally impossible to use market cap to compare markets as more assets will drive market cap always higher even at the same price!
This is the first clue I give why XRP will be the only one with a longterm high price: XRP will be used by banks to perform cross-border transactions in the amount of billions (if not trillions), per day! There will be extraodinary demand for XRP and this will drive price crazy!
Now we know which things we need to make our journey safe. Stay tuned.
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