Market cap is not what it seems.

Market cap is a widely used metric for measuring the size and value of a cryptocurrency or token economy. Market cap is calculated by multiplying the circulating supply of a coin or token by its last transaction price.

Market cap does not represent how much money has been pumped into a coin or token.

As an example, if a market cap rises or falls by $1 million, it doesn’t mean $1 million has been pumped or pulled from the token economy.

If I create a token with a circulating supply of 10 billion tokens, put it on an exchange and sell the first token for $1, the market cap is now magically 10 billion dollars even though only a single dollar has been pushed into that tokens economy.

Same thing with cryptos that have been around. Bitcoins purchased and hodled in its infancy for pennies are valued at the current market price (~$61,000) even though a single penny went into the economy at the time of purchase.

Hopefully this clarifies why market cap shouldn’t be taken as gospel, especially when valuating a crypto assets against another asset.

Edit: had to add “circulating” to supply since people want to split hairs on a hypothetical