The market cap of a stock (shares outstanding x share price) makes sense because each share represents a piece of the profits of the company and an ownership stake. If you took away half of the shares, the price per share would ~double and the market cap would remain the same since it's based on current cash + projections about the future profitability of the company, and the share price reflects those expectations. None of that is true for crypto.
Financially illiterate crypto people started multiplying the coin price x number of coins outstanding and calling that a "market cap" but there's nothing underlying the crypto world. Owning a bitcoin doesn't represent a percentage profit of some underlying economic activity that's being independently valued, coins are zero coupon bearer instruments, the value is in the coin itself. It's like talking about the "market cap" of pesos, just incoherent and easily gameable.
https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc...
He’s the CEO of one of the largest and most established crypto exchanges. The interview is stunning.
I remember a guy on HN a year or two ago who was very proud of the ICO he ran in 2017. The token was useless, investors lost their money, and he was fined something around a million dollars by the SEC. But to him that was a mark of pride, like he fought The Man and won. His excuse for scamming investors was basically “startups fail too, I’m a founder.”
The toxic startup hustle exemplified by Uber and some other companies ten years ago directly led to the utter moral collapse in crypto.
And like, if you're a crypto true-believer, any crash that may or may not happen this year probably doesn't mean too much: the surge in prices wasn't because of any particularly groundbreaking developments in terms of the main long-term pitches (e.g. "new financial infrastructure for the world"), even NFTs seemed to really follow the price run-up, not lead to it. It really looks more just like a lot of people gambling with cash to burn in a situation where a lot of traditional entertainment was less attractive if not outright restrictive. So keep your head down and keep building...
But building a trading platform then talking shit about stuff that as far as I can tell you are making money off of trading (e.g. Luna, https://help.ftx.com/hc/en-us/articles/4491807784852-FTX-wil... )... that just seems begging for trouble.
Perhaps it's excessive pattern matching, but it's hard not to see a civic relationship between the (correct) perception of startups as underhanded and the rise of an entire industry of scammers who will do and say anything to get ahead.
So the view from the inside, like what a VC sees, is that everybody is piling up and it's so so easy to say "I've got hot shit" and you have to be like "yeah maybe." A lot of the time "don't pitch me bro." And set it up like a nightclub, realistically none of the founders will have real tech without getting it from real researchers, so they have to impress you with how well they work the club. Now that I say that I'm figuring out my own strat too, treat it like a club.
So the second secret, don't tell anybody, don't link to this comment, close the doors, unplug the ethernet, turn on the wifi jammers, put your smartphones in the faraday cage, the secret is: everybody wants you to lose. Everybody wants you to lose. Just like in a club. When you accept that, it's so much easier! The entire club wants you to prove you're a lesser man, like sit next to the bar waste your money on drinks (never on a hotel), parade in circles concentrically around the women dancing with their clique of girlfriends in the middle, asking like once or twice and feeling bad for months about being rejected, that's what the club wants the men to do. And there is violence at the club, it's not like "the worst that can happen is she says no" that's a load of shit, it depends on a lot of things.
So it's the same adversarial environment, everything going against you. Realize that, and it's suddenly much easier.
"Market cap" estimates assume that everyone could sell without the price moving. It's going to be far more sensitive to price changes than an actual country's GDP, it's based on what current trading prices are.
And Bitcoin, unlike a company with a huge market cap, isn't providing goods or services. E.g. if Apple disappeared into thin air, everyone hoping to buy new Apple phones or computers would be dramatically affected and that would have a ton of ripple effects. But if Apple's sales dropped to 0 and then they went out of business, their valuation would be down to 0 but a lot of people would've recouped some of their investment on the way down - the people selling earlier being better off than the ones later. This is a crazy scenario, though, since they're sales wouldn't go to 0 overnight.
So who's actually relying on Bitcoin? Some companies in the space, sure. Probably a bunch of individuals who did stuff like use bitcoin as part of their wealth portfolio when taking out loans. But if those people had those holdings wiped out, will the ramifications be huge? My guess is probably not but I don't actually know how many people would, for instance, be unable to pay their mortgage if their crypto holdings imploded.
(This will be interesting to see if a crash does happen: in a world where you believe prices always go up, the "clever" move is to not sell your bitcoin, but to borrow against it, so it appreciates in the background still. But in a world where there's a crash, this could leave you worse off than before, the debt won't go away just because the price fell.)
~$7500 (Dec 2019) to ~$35000 (May 2022)
You can even see it on your chart.
How is the late-2019 starting point relevant?
That’s roughly the entire GDP of France. If France’s economy poofed out of existence or halved in value, that’d be a huge shake up.