Re:More than $70B wiped off crypto market in 24 hours as BTC...
by jfengel on Friday March 10, 2023 @09:03AM
(#35094393)
"Market cap" is always a dubious number, even for something like stocks that do represent an actual underlying asset. It's extrapolating the last trade (or last few trades) to the entire set, and that's not realistic. A market capacity can drop millions of billions with just $1 changing hands.
The number isn't completely worthless. Most of the time, you're not thinking about liquidating the entire thing all at once. The actual total number isn't all that important, but the way it changes is informative -- it accurately captures what happens at the margins.
Crypto is weird in that the entire thing genuinely can collapse at a moment's notice. Unlike a stock, there's no real-world asset anywhere, just the consensual agreement. Even a fiat currency at least has the force of a government collecting taxes and paying wages.
The market cap is a useful number so long as nobody expects to actually realize it. When you actually could realize it, like a currency collapsing, you have to unpack the full meaning of it and realize that it's very different.
The number isn't completely worthless. Most of the time, you're not thinking about liquidating the entire thing all at once. The actual total number isn't all that important, but the way it changes is informative -- it accurately captures what happens at the margins.
Crypto is weird in that the entire thing genuinely can collapse at a moment's notice. Unlike a stock, there's no real-world asset anywhere, just the consensual agreement. Even a fiat currency at least has the force of a government collecting taxes and paying wages.
The market cap is a useful number so long as nobody expects to actually realize it. When you actually could realize it, like a currency collapsing, you have to unpack the full meaning of it and realize that it's very different.