"B-But the Market Cap...",
The Market Cap...",
"Look, the Market Cap..."
...repeated ad nauseam, whenever redditors are trying judge if a coin is under-/overvalued. The truth is, Market Cap ALONE cannot tell you if a coin is under/over-valued.
In order to properly estimate, you need at least 2 more variables:
A) TAM (Total Addressable/Available Market)
Image a cup filled with water.
Market Cap only tells you how much water in the cup...but it doesn't tell you how big is the cup at all!
The size of the cup, is TAM, and those empty spaces without water, represents the potential growth.
Simply put, TAM tells you how much money you can make by tackling a specific problem.
Obviously, different coins have different size of TAM: some at multi-million/billion level, others are at multi-trillion level world-wide, totally different order of magnitude.
Example, Ripple CEO claims to tackle a 27 TRILLION dollars problem:
^ Can we trust that number?
Even if that number is correct, can we assume XRP's TAM = 27 trillion? I don't know, but here's more points to ponder:
Ripple is focusing one goal at a time, right now it's banking sector, but that doesn't mean XRP can only replace SWIFT.
In fact, right at the front page of https://ripple.com/ you can find other Use Cases at the top. So, by no means replacing SWIFT is the end-game...in fact, it highly likely that it is only the beginning, because by nailing the bank first, will make achieving the rest of listed Use Cases easier.
Each of those use cases is a different cup (TAM), and hell, those cups may even overlap!
My point is?
I suspect none of us outsiders truly knows the exact value of XRP's TAM at all time. The TAM may also change, as new regulation happens (removing cups, or opposite: removing barriers), or when new circumstances arise (such as competitor totally filled-up one of the cup, making it not worth the effort/trouble anymore...or it may even be new-found opportunities, opening-up more cups).
B) Circulating Supply
This one should be pretty obvious, so I'll make this short.
Supply-demand is the driving force of price.
Any escrow'ed/locked/lost-private-key coins = cannot meet demand = out of the short-term price equation.
To judge if a coin is over/under-value in short term:
To judge long-term:
^ And these are simplified to ignore coin-burnt/lost.
And no, comparing other similar coins aren't a good measure either, unless they are very close (this is very subjective) in terms of leadership goals, use-cases, circulating supply, coin-burning mechanism, marketing, etc etc etc...let's not get into that rabbit hole, it is out of the scope/purpose of this post.
So as you can see, using Market Cap ALONE is absolutely not a good way to judge if any coin is over-/undervalued, you need to know the other variables as well.
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Please, use it sparingly and carefully, don't be misled and/or misleading.