RE: How ICOs inflate the cryptocurrency market cap
Hi, glad you're finding my stuff useful!
Actually since Alice paid 1 ETH, now it's actually worth nothing (well, the token).
My reasoning is that the act of paying 1 ETH is what makes the token valuable. I mean "valuable" here in the sense of "having a market value." The market value of something is the only thing that impacts its market cap, and understanding the massive market caps of cryptocurrencies was the main goal of my article.
ETH supply has not changed.
Correct, but the new ICO token that Alice bought now exists, whereas before she bought it it didn't exist. So the market cap of ETH is still exactly the same, but the market cap of whatever this ICO token is has grown.
I wonder if you're mixing up different notions of value. The ICO token that Alice bought might be for a crappy project, but the token can obviously have a market value that's independent of the project's value. We see this in Ponzi schemes like the old Bitconnect. The project was vapor (and this was known by a lot of people), but the token had a huge market cap.
Clear anything up?
Yes! I guess it was about semantics. As you said, new tokens inflate the market cap, totally agree. I guess my point was more towards the fact that this inflation is the same that happens with the actual mining of one BTC for example; or even less, since at least some of these new tokens will actually end up having a utility.