Crypto - Liquidity Vs Marketcap? and More Importantly, What Is The Correlation between Liquidity, Burn and Yield?

I've just been looking at the financials that some of the Crypto companies hold. Trying to ascertain what they are really worth, and how sustainable are the APY's on offer.

Using Pancake Swap as an example,

Market Cap $5.1 Billion (which I believe is every token in circulation x current price…which isn't realistic as the price drops as more are sold).

Vs

Liquidity which is around $627 Million. (is this in actual $USD?) - Is this a real reflection of Pancake Swaps's worth? and do they burn CAKE according to liquidity? (ie. they cant have more CAKE in circulation than Pancake Swap is worth)?

Source: https://poocoin.app/tokens/0x0e09fabb73bd3ade0a17ecc321fd13a...

Comments

  • +2 votes

    I've just been looking at the financials that some of the Crypto companies hold. Trying to ascertain what they are really worth,

    This is now how crypto works……
    Crypto pricing isn't based on fundamentals.

    •  

      Kind of outrageous to suggest crypto's not based on fundamentals. Remember when you were in grade five at home filling out a workbook to find the highest common factor? Did you not think, "this is great; one day I'd like to buy a couple of these 'factors' but to a much more difficult factorisation problem! I reckon a year of Mum working is a fair price for such a thing"?

      • -1 vote

        The fundamentals are based on trust. It is like the trust people have on the USD which is breaking down. Just like people who trust Elon Musk knows what he is talking about then he called Doge a Hustle.

        There is the rest of the fundamentals. Regardless of how much people hate or think they got gouged by Woolworths and Coles the fundamentals you can't discount is the fact they got a footprint that is hard to replicate and be able to profit from that for a long time to come.

    •  

      You cant release a coin without having Liquidity, so there are definitely fundamentals at hand. However, $1 will satisfy the requirement for liquidity (so do your due diligence…most don't…i'm trying to). So here is the enigma.

      In my example above, Pancake Swap (PCS) in just 12 hours now only have around $500 Million liquidity in their contract (perhaps buying their own tokens with their own liquidity to maintain valuations so as not to trigger a massive stop loss sell off). So they have lost $100Million over night. The Marketcap at 4.7 Billion. Tokens (cake) in circulation around 300 Million.

      So does this mean a current liquidated value of around $2 per token? ($600million divided by 300million tokens). It is currently trading at around $29 per token).

      Now pancake swap does around $1 Billion of trades per 24hrs, but charges a few cents per trade. So I don't know the 'real revenue'. I glanced past Binance the other day and it was something close to $1 million USD per 24 hrs… that's a fundamental.

      Getting back to PCS (and all other the same) so they don't need to use their own money, they incentivise users to place money (Yield Farming/ pooling/ staking) into PCS. Similar to a term deposit or bonds. In return they provide a return yield (in the form of their own token) to all those who have staked into PCS.

      Now every time they trade their token to another (which can then be converted to say AUD), they 'burn'/ destroy a number of tokens.

      So this is the fundamental I don't understand. How can they give out a token (that is potentially traded out into AUD), then just destroy it…while giving a new one to a Yield farmer/ Staker?

      So what is the correlation between liquidity, burn and yield?

  • +1 vote

    Honestly - when you are looking outside of the top 5 maybe top 10 Cryptos (not including Doge) - Who the faq knows?

    Crypto and the rise of BTC has shown the 'fundamentals' are dead - even in the share market the fundamentals are dead GME is a company that should be worth $5USD but instead it is sitting at $160!

    The sooner people realise that the rules for investing have 'changed' the sooner you will start making better then a 4-5% return annually. I know it is 'scary' to think for yourself but due to technology changing investors are smarter now the ones who do the DD themselves are the ones making the big gains

    •  

      The sooner people realise that the rules for investing have 'changed' the sooner you will start making better then a 4-5% return annually

      Current 4 - 5% is due to a mathematical limit. If you a run a company and you can lift prices by 2% a year and say 50% of that is profit then it is 1% increase in profit, multiply it by your P/E for example 8 then 1% x 8 = 8%.

      For bitcoin it is a fixed 11m coins. If 11m people willing to pay $1 then it is worth $11m. If the next person wants to buy it and the only offer from holders is $2 then suddenly market cap is worth $22m and price indicator is $2. If bitcoin makes no money (like gold, and lending it out to traders is not really a business) then it is all based on trust someone else will pay more for it.

  • +5 votes

    I create a new coin. Total coins: 1 billion. I trade with myself for $1 for a coin. Much wow, this hot new coin has a market cap of $1 billion already.

    Anyone want to buy in? It could go to $10!! Rocket!! Moon!!

    • +1 vote

      This reply is spot on - market cap does not reflect the amount of money invested into the asset.

      Bitcoin's market cap could move up by a Billion dollars (0.1% price movement) with just a few million $ worth of trades.

    •  

      Cheers, but hence the initial question. Shouldn't all the coin price sites be showing liquidity. Marketcap tells you about 'trends', but is liquidity the true worth? (and this data is hardly ever seen, poo coins being the first site I have seen who shows it).

      •  

        I set up a program that rapidly trades random amounts/blocks in $0.95-1.05 range to the point there's about $100 million volume. Much wow! For what it's worth, hedgefunds do it to stock market a lot (ie ladder attack). Cryptos aren't regulated.

        What's next?

        •  

          Using Hummingbird?

        •  

          Sorry, I mean using Hummingbot?

    •  

      Yeah, but if you do your due diligence, you can look at the coin contract and see how much liquidity is locked into the coin (if its even locked at all). A scam will notoriously have less than $10, or have it unlocked so they can withdraw it as soon as it is released. So Marketcap is telling you people want it (the trend), but getting back to my question, is the true worth at that exact point in time $10 divided by 1 billion?

  • +1 vote

    I think its much to do with covid too. Lots of peoole cant go out or travelling and are sitting on their money. The only thing they know what to do with their money is crypto, because everyone is talking about it aka fomo. And all that stupid money keeps snowball running.

    •  

      I think this is true in the fact Marketcap is many multiples of liquidity. Not to say company 'x's liquidity will never reach the anticipated marketcap.

      I still don't understand how Facebook is worth so much. I have never sent them a cent, and I've never seen a product advertised on it that has prompted me to buy it.

      As for spare $ from not travelling…I am that guy ;)