Marketcap, coin price and circulating supply for dummies

If you are here, you are not a dummy. On the contrary, you are curious and most probably intellectual. However, you might still not exactly have a good grasp all these concepts. Don't worry, neither did I in my first steps in this world which can be daunting in the beginning, pretty much like any other complex ecosystem. So, I would like to tell you a story that will hopefully help you understand concepts like marketcap, price changes and ciculating supply, terms you see in e.g. coinmarketcap.

Imagine a small village with population around 1000 people, somewhere completely isolated. At this village, life goes by normally. People work and trade using their money which they call dollars. There, one day, a young bright fellow finds a cave with some magnificent small identical bright green stones. He takes them home and counts them to find that they are exactly 100. He had never seen such stones before, as if they were from a entierly different world. He initially tried selling them 1 dollar each, but nobody wanted his stupid green stones. So, our clever protagonist decided to give 10 of his stones for free and described them as lucky stones. Indeed, some of the people who received the stones started feeling lucky. Rumors spread in the village and soon after, everybody wanted a lucky stone. They even offered to buy from the people who received one for free at a price of 1 dollar. People eventually gave in and sold all of their lucky stones. Now people who bought the charms started feeling even more lucky! They went about their work with an aura of confidence and power. People without lucky stones were jealous and wanted the same, so they started offering higher prices to buy the stones. Now comes in our protagonist having another 90 stones hidden in his house. He started selling at 10 dollars per stone selling a few per day. He ended up selling his last 10 stones at 20 dollars per piece. Other people would also sell theirs for as much. They were happy being lucky, but they needed the money to buy food. One day, a lucky stone bearer tripped and broke his ankle. He was a farmer so this was devestating for him. Soon after, everybody heard that the lucky stones are not so lucky after all. They all started selling at 20 dollars but nobody would buy. The price dropped at 1 dollar per stone for the few believers who even bought more than one stone. And that was the end of the lucky stones...until they gave luck again that is!

Hopefully the story by itself gives you a some idea of how and why the price of cryptocurrency coins change the way they do. While not only news correlated, generally, prices in cryptocurrency change depending on the value that people give them.

Now about the marketcap and cicularing suppply of the story. Initially, the marketcap was 0 dollars and the circulating supply was 10 stones. Then, the marketcap was 10 dollars and the circulating supply remained 10 stones. Now comes the important part. Once the young fellow finished selling the last of his stones, the marketcap was 2000 dollars and the circulating supply was 100 stones. The price in the village had reached its all time high (ATH) of 20 dollars per stone, so 20 x 100 = 2000. Notice however, the total amount of dollars spent for the stones is not even near 2000 dollars. The total amount of money spent is approximately 10 + 800 + 200 = 1010 dollars. The marketcap is just a big picture of the total value as it is currently perceived by people at a current time and not the total amount invested. In the epilogue of the story, the marketcap fell to 100 dollars with the circulating supply remaining 100.