If I understand you correctly, you are saying that value/worth exists because of price and a liquid market. This is incorrect. Price is independent of value, and does not require the ability to sell.

Suppose the government made a law saying that you cannot never sell KO (Coca-Cola stock). Today KO is selling for $41.62/sh. Tomorrow, is it worthless? No. It pays a 3.05% dividend, which it typically increases 10% a year. It is worth at least $1.27 (the first year's dividend).

Now to the question about cats selling for $500k. Would a sensible taxing authority or professional auditing firm assess a flower at $500k - $1 million? In 1637 a single Viceroy tulip bulb sold for 3000 - 4500 florins; a skilled craftsman made 300 florins/yr [1]. Assuming that a skilled craftsman would make at least $50k/yr (probably more, given that $50k is near the median US income), one tulip bulb cost $500k - $1 million. Not so different from selling cats for $500k, so you cannot attack the example for unreasonable prices (s/(dog|cat)/tulip bulb/). Now, was it worth that price? No, hence why it fell back to a much more reasonable level shortly afterwards. But during the mania, selling one tulip in exchange for two lesser-valued tulips would be quite valid.

You missed the point of the illustration, which was that price (market cap) has no relationship with value. Admittedly, the illustration was rather opaque.

[1] https://en.wikipedia.org/wiki/Tulip_mania