Market capitalization is an indicator for assessing the value of equity in companies. Crypto has inherited the metric from stocks and is having a hard time trying to get rid of it. Problems here are:
Market Cap takes into account all coins distributed so far, not distinguishing lost coins within the circulating supply (or coins intended to be hodled for long periods).
The point is: if a cryptocurrency has a market cap of $1 billion, it doesn’t mean that $1 billion has flown into that asset. One can create a billion coins; sell 2 of them for $2; and thus pump into CoinMarketCap an excess of $999.999.998 in relation to the actual amount that asset has been traded for.
A more appropriate measure of network value was recently put forth by Nic Carter. Remember capital flows in crypto generally do not come in via exchanges (miners notably like to sell OTC). Every buy in an exchange is matched by a sell. Money that comes in = money that goes out.
True inflows (in Bitcoin , at least) are the aggregate of resources spent by miners. And a good proxy for that is the amount these folks are earning back from networks they support in return for their investments. That’s aggregate security spend (or Thermocap): what was actually paid out to miners (coinbase transactions * their price in USD at the time they were mined).
What does it portray?
A more effective measure of wealth in illiquid markets. How much the network has been worth to its maintainers, in cash flows.