Yep, it’s another post about doge. And it’s going against the popular narrative so I expect it won’t really land; I believe in stating the facts regardless of popularity.

Let’s talk about market caps.

What is a market cap?

People often get confused as to what a market cap actually is. It’s not how much wealth has been put into a coin. It’s simply how much you would get if you simultaneously liquidated all coins in existence. Will that ever happen? No, not even for scam coins as bag holders are part of the scam.

So what is the relevance of market cap? In hard math terms, nothing. It’s a heuristic we use to judge a market’s overall value for a single coin. Heuristics are that which we use in absence of hard indicators. Heuristics are only as useful as their correlation to correct predictions. If a heuristic no longer works for a prediction we should not factor it into our equations.

All assumptions fall before data. Don’t fall with them.

”Doge’s price can’t reach $X, its market cap would have to reach a bajillion dollars!”

This claim is made constantly on this subreddit by people who have heard about and loosely understand market cap but so loosely that they don’t realize these two ideas are not actually logically connected.

Market cap is determined by price, not the other way around.

People seem to have this underlying misconception that if doge reached a market cap of, I dunno, $10T, that $10T of USD would have to have been used to buy doge. Of course that seems ridiculous. Why would a coin with no use ever have that much money put into it?

Because that is not how this works.

Let’s say we have a coin with a circulating supply of 100B. Let’s say 99.9% of these coins are held by true believers so only 100M coins are traded. Let’s say the price at ICO is $0.01 so its market cap is $1B, and that all of these coins were originally bought at this price, meaning the amount spent on it was $1B. Price is based on last sale, so if those 100M maintain a sale price of $100, then those 99.9% held in wallets are also worth $100.

In other words, our hypothetical coin has a market cap of $10T even though only $1B has been injected into the market.

”Doge has an infinite supply! It can’t have value!”

This is also wrong. Doge’s supply is uncapped. It is not infinite. At any given time, there are a finite number of doges in circulation. That number increases by a constant rate every year. Because of this, the percentage change in total supply will increase by smaller and smaller amounts each year.

It will take 20 years for doge to reach double its supply since becoming uncapped and it will take 40 years after that to double again. This is not even factoring all the doges that will be lost in flash drives and cold wallets in landfills. That is not hyper inflationary. That may in fact lend itself toward longterm health.

There is, however, a more important principle at play here.

Price is determined by demand and demand alone

Supply side economics is trash. We have 50 years of evidence to demonstrate this. Demand dictates price. Your supply does not matter if no one is willing to pay what you’re selling it for. You may be able to use your supply to guide demand, but ultimately the whims of the market – the demand of customers – dictate price.

If there is more demand for buying than selling, price goes up. If not, price goes down.

Where does market cap factor into this equation? Where does inflation factor in? Only in heuristics and abstraction.

Don’t confuse abstract principles for ground truth

You can whine about doge being pumped by celebrities and having no use cases but the fact is that currency relies on a network effect to have any value. So do memes. Currency has to be memetic to work.

tl;dr

I’m not saying doge is the future or that doge will reach $10, but that if it isn’t and doesn’t, market cap and inflation have nothing to do with why.