can you please explain how cap holds work? Can they free up more space by renouncing HB or are they pretty much set at 36mil? TY in advance
The point of a cap hold is as follows: If you have the right to sign a player to a contract in excess of the salary cap (e.g. Bird Rights, these are called "exceptions"), the league assigns an arbitrarily-valued cap hold (based on what the player might be paid)
as if you had actually already signed the player. This is ultimately to prevent teams from being able to use both salary cap exceptions AND salary cap space.
A fictional example might be useful: The salary cap is $100M and the Lakers have no players under contract, but have three free agents for whom they own Bird Rights. Via Bird Rights they can pay LeBron $50M, they can pay Shaq $50M, and they can pay Jordan $50M. If there were no cap holds, the Lakers would have $0M in actual salaries, and they could sign free agent Curry for $50M, then sign free agent Kobe for $50M, coming up to the salary cap of $100M, THEN turn around and use their Bird Rights on LeBron, Shaq, and Jordan, creating the superest of super teams and having a total salary of $250M. However, the cap holds for LeBron, Shaq, and Jordan come up to $150M, so the Lakers are effectively over the cap. If they wish to sign Kobe, they have to renounce at least two of LeBron/Shaq/Jordan. So cap holds prevent teams from using cap space to sign free agents and THEN sign their own free agents.
Here is a different and more useful fictional example of how things normally work: The salary cap is $100M and the Kings have $70M of contracts. However, they also have two free agents for whom they own Bird Rights. Jones has a cap hold of $25M, and Smith has a cap hold of $10M. If cap holds were not a thing, the Kings would be able to sign $30M of free agents, and THEN sign both Jones and Smith above and beyond the salary cap. However, with cap holds, the Kings' effective salary is $70M + $25M + $10M, which is $105M, and over the cap. As such, the Kings are considered to be over the cap, and cannot use cap space to sign other teams' free agents. Additionally, as a consequence of being over the cap, the Kings automatically acquire two additional exceptions, the Mid-Level Exception (MLE, let's call it $10M) and, if not used the prior year, the Bi-Annual Exception (BAE, let's call it $5M). Those exceptions ALSO count against the Kings' effective salary as if they had been used, so the Kings' cap number is actually $120M.
If the Kings wish to spend money on other teams' free agents, they can only do this with cap room, which they do not currently have. (We'll ignore sign-and-trades.) However, the Kings can generate cap room by renouncing their exceptions and/or their Bird Rights to Smith and/or Jones. Once those rights are renounced, they are gone, and do not come back.
Let's imagine the Kings wish to sign free agent Brown, who will command $20M. That would mean they have to get their cap number down to $80M from its current $120M. Renouncing Smith ($10M) will not initially help. The Kings therefore renounce their $25M rights to Jones. That brings them down to $95M. Now they are under the salary cap. Because they went under the salary cap, the MLE and the BAE magically disappear, so the team salary has been reduced by another $15M to $80M, precisely what they needed to sign Brown. The Kings sign Brown to a $20M contract, meaning that they now have a cap number of $100M, which consists of $90M in salaries (their original $70M plus $20M for Brown) and the $10M cap hold for Smith. Now they can sign Smith, let's say for $7M, and they have a total salary of $97M and remain "under the cap". However, by spending "close" to the cap in free agency, they now generate a second MLE called the Room MLE (worth less than the MLE and more than the BAE, so let's say $7M). The Kings use the entirety of the $7M Room MLE on free agent Williams, bringing their salary to $104M. The Kings now have no exceptions remaining, so if they need to acquire other players, they need to do it either via trade or via minimum salary (minimum salaries are ALWAYS excepted from salary cap rules).
As you can see, the Kings initially could have acquired a total of $120M of contracts, had they signed Jones and Smith to the largest deals possible and used their MLE and BAE. Instead, they chose to move away from Jones, and to go after Brown and ultimately Williams instead. They were able to do it, but they were NOT able to go as far above the salary cap - they only went to $104M (they could have gotten to $107M). The NBA, then, enables teams to exceed the salary cap more extensively by resigning their own players than by signing free agents. Since there are some paradoxical benefits to operating over the salary cap (e.g. the MLE and BAE, and having larger salaries to trade for larger salaries) many teams prefer to operate over the cap as a rule. This system therefore discourages free agent movement.
