Yeah, in response to your ideas, it obvious that when prices rise, it is due to buying and selling activities and this will definitely increases liquidity and thus enhances the marketcap ( remember that, marketcap = coin price × circulating supply and also price = marketcap/circulating coin supply) at certain period of time.
Now, what is liquidity of a coin? If you check your CMC, you may notice that marketcap drop as prices drop too. I put to you that the overall marketcap increases as price increases. Vice visa
So are you changing the "When market cap increases, the price of every coin increases to something like "market cap increases as a result of increase in overall prices of coins"? If yes, then I can accept that statement.
This is why it is important to challenge or question statements in the original post. You may have had lapses there because it was clear to me that increase in every coin is not accurate.
My friend, if you are good in Economics just like i do, you may understand this principles of crypto market capitalization. Marketcap in crypto is a little differ from stock or other market equity or investments.
A general consensus or definition of market cap in crypto is that it is the amount of money invested in that particular coin.
For example, if Coin A’s market cap is 1 million dollars, it is understood that it is the amount invested in it.
I think this is where people base their ideas, but i think otherwise, for example , do you think when Bitcoin reached $200 billion in market cap, 200 billion dollars were invested in it? This is not.
When market cap increases, the price of every coin increases and one needs to understand that there are no new money coming in for the coins that you have or anyone else’ has.
In a nutshell, this formula may be applied. Marketcap = coin price × circulating coin supply, and Coin price = marketcap/circulating coin supply. This is where liquidity/coin volume comes in. Remember that coin volume is an indicator of liquidity.