Personal Finance & Money Asked on July 8, 2021
I noticed that the price of Rapids (RPD) cryptocurrency increased by 31,915,000% (market cap: $400bn) in 1 hour yesterday on 8th May. Shortly after (5-10 minutes), the price dropped by 99.6% (market cap: $1.85bn). Reference: https://coinmarketcap.com/currencies/rapids/. Why did RPD have this spike and immediate drop?
Another thing I noticed was that the 24h past volume of RPD during the spike was at $480,000 which is much higher than the cryptocurrency’s market capitalization. A few minutes later, RPD dropped to $10,000 volume in the past 24h. Note that the usual 24h volume of RPD in the past few weeks has been around $1,000. How is it possible for a cryptocurrency to have a $398bn increase in market capitalization with only a volume of $480k?
How is it possible for a cryptocurrency to have a $398bn increase in market capitalization with only a volume of $480k?
It is possible. To illustrate:
Imagine a cryptocurrency with 1 million coins that has a price of $1 per coin. The market capitalization of this cryptocurrency is $1 million. Later, someone people traded 6 coins at $5 (i.e. the price rises to $5). $30 worth of coins were traded. The market capitalization of the cryptocurrency is now $5 million (1 million coins * $5 per coin), with $30 of "volume". In other words, the cryptocurrency had a $4 million increase in market capitalization with a "volume" of only $30.
Answered by Flux on July 8, 2021
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