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Here's what "thin" means in practice. Imagine two different sets of digital objects: AlphaCoins and BetaCoins - they're identical in the say way physics profess

Here's what "thin" means in practice. Imagine two different sets of digital objects: AlphaCoins and BetaCoins - they're identical in the say way physics professors say "imagine an infinite frictionless plane". Both have a 1000 in circulation. Both are worth $10 each. Both have a market cap of $10,000 US Dollars. But the market for AlphaCoins is "thin" (small changes in supply and demand make for really big price swings). There's a run on the market and everybody wants to sell off their coins. After a day's trading: AlphaCoins price is $3 / coin. BetaCoins price is $9 / coin. For goods and services you'd call this the price elasticity of demand (You can change the price of medicine and people will keep paying it b/c without it they'd die - it's inelastic - the same can't be said for a snack bag of cheetos). To me, this is the article's argument. That while these terms describe the same things across markets there are some big differences not captured in simple "market cap" comparisons. Maybe a better analogy is two all you can eat restaurants (identical, yadda yadda) but at one you can use your full set of dining implements and at the other you can only use a fragile toothpick to eat your food with - and all anyone can write about is how the quantity of food in both places is the same.

Alex3917 9y ago
To give a real life example, the other day I bought about $2,000 worth of a crypto asset, which caused a ~20% spike in price and raised the market cap by ~$5M. I'd say what the asset is, but I can't because if literally only one other person reading this decided to buy some then I effectively wouldn't have the option to buy more of it.
- bognition 9y ago
  Why are you buying something that can't support multiple simultaneous buyers?
  - sillysaurus3 9y ago
    That's the best time to speculate.
  - Alex3917 9y ago
    I only buy things where I won't be unhappy about the price I bought them even if crypto prices decline by 80%. Mostly things with market caps under $20M. The lack of liquidity doesn't bother me. Either the technologies will get real world use and the tokens will get listed on major exchanges, or else they'll go out of business, just like any other tech startup.
    - bognition 9y ago
      How can I find out more about these opportunities?
- smokeyj 9y ago
  So the market cap is you. This doesn’t apply to bitcoin.
  - charlesdm 9y ago
    Maybe. But if an institution were to accumulate $1bn of Bitcoin through exchanges, I'm pretty sure that would drive up the market cap a lot more than $1bn.
    - mitchellberry 9y ago
      What's the difference between that and the same company buying a pennystock? This is how markets work.
- bdamm 9y ago
  Depending on the secrecy of an asset to retain its value and your ability to buy it sounds like a very fragile position to be in.
  - Alex3917 9y ago
    If the price goes up it should be because the technology has become part of the backbone of the Internet, not because people are promoting it on social media when there is zero volume.
- deleted 9y ago
  [deleted]
log_base_login 9y ago
Thank you for the explanation. What I find interesting, in addition to your description of the price elasticity being at issue, is precisely _what_ a bitcoin represents. In fact, what _all_ cryptocurrency represent, to my knowledge...and that is, some increasingly unbreakable cryptographical mechanism by which information may be passed at ever more secret rates. The question I have is: precisely who is in the market for such things, and are they not, in fact, what is holding these currencies together? It also begs the question: if the person who can afford to 'buy' the cryptographical information is the one "funding" the market, are we not at the beck and call of the deepest pockets in terms of securing what may ultimately be state-secret level data?
- inimino 9y ago
  The "crypto" in bitcoin is about being able to know that the copy of the blockchain you have is indeed the "authentic", consensus blockchain. It has nothing to do with keeping anything secret, as the entire blockchain is literally as public as it is possible for data to get.
  - log_base_login 9y ago
    Thank you for clarifying that for me. I recall reading some article about how, when mining for bitcoin (for example), what was really being mined are progressively larger prime numbers, or scientific data, or some such data requiring lots of computation. Isn't there something of real value being mined? If not, what is being done when people _mine_ bitcoins?
    - PeterisP 9y ago
      Mining is a "proof of work" event - in essence, you generate a random value so that a cryptographic hash total block would end with a particular number of zeroes. Such a block + hash is trivial to verify but very time/effort consuming to create, thus proving that you spent a large amount of (otherwise useless) work to "mine" that block. Having a large amount of work required is what prevents a malicious actor from tampering with the chain, since doing so requires doing as much work as all the other miners together.

Alex3917 9y ago

To give a real life example, the other day I bought about $2,000 worth of a crypto asset, which caused a ~20% spike in price and raised the market cap by ~$5M. I'd say what the asset is, but I can't because if literally only one other person reading this decided to buy some then I effectively wouldn't have the option to buy more of it.

bognition 9y ago
Why are you buying something that can't support multiple simultaneous buyers?
- sillysaurus3 9y ago
  That's the best time to speculate.
- Alex3917 9y ago
  I only buy things where I won't be unhappy about the price I bought them even if crypto prices decline by 80%. Mostly things with market caps under $20M. The lack of liquidity doesn't bother me. Either the technologies will get real world use and the tokens will get listed on major exchanges, or else they'll go out of business, just like any other tech startup.
  - bognition 9y ago
    How can I find out more about these opportunities?
smokeyj 9y ago
So the market cap is you. This doesn’t apply to bitcoin.
- charlesdm 9y ago
  Maybe. But if an institution were to accumulate $1bn of Bitcoin through exchanges, I'm pretty sure that would drive up the market cap a lot more than $1bn.
  - mitchellberry 9y ago
    What's the difference between that and the same company buying a pennystock? This is how markets work.
bdamm 9y ago
Depending on the secrecy of an asset to retain its value and your ability to buy it sounds like a very fragile position to be in.
- Alex3917 9y ago
  If the price goes up it should be because the technology has become part of the backbone of the Internet, not because people are promoting it on social media when there is zero volume.
deleted 9y ago
[deleted]

log_base_login 9y ago

Thank you for the explanation. What I find interesting, in addition to your description of the price elasticity being at issue, is precisely _what_ a bitcoin represents. In fact, what _all_ cryptocurrency represent, to my knowledge...and that is, some increasingly unbreakable cryptographical mechanism by which information may be passed at ever more secret rates. The question I have is: precisely who is in the market for such things, and are they not, in fact, what is holding these currencies together? It also begs the question: if the person who can afford to 'buy' the cryptographical information is the one "funding" the market, are we not at the beck and call of the deepest pockets in terms of securing what may ultimately be state-secret level data?

inimino 9y ago
The "crypto" in bitcoin is about being able to know that the copy of the blockchain you have is indeed the "authentic", consensus blockchain. It has nothing to do with keeping anything secret, as the entire blockchain is literally as public as it is possible for data to get.
- log_base_login 9y ago
  Thank you for clarifying that for me. I recall reading some article about how, when mining for bitcoin (for example), what was really being mined are progressively larger prime numbers, or scientific data, or some such data requiring lots of computation. Isn't there something of real value being mined? If not, what is being done when people _mine_ bitcoins?
  - PeterisP 9y ago
    Mining is a "proof of work" event - in essence, you generate a random value so that a cryptographic hash total block would end with a particular number of zeroes. Such a block + hash is trivial to verify but very time/effort consuming to create, thus proving that you spent a large amount of (otherwise useless) work to "mine" that block. Having a large amount of work required is what prevents a malicious actor from tampering with the chain, since doing so requires doing as much work as all the other miners together.