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It's facetious (and bad 'journalism') to claim $100B vanished. It was never there to begin with: market cap isn't something you can cash in on. It's merely the

It's facetious (and bad 'journalism') to claim $100B vanished. It was never there to begin with: market cap isn't something you can cash in on. It's merely the result of price multiplied by supply. If you owned a significant portion of all the coins in the world, and tried to sell them all at once, you wouldn't end up with number_of_coins * price, it would (realistically) be a smaller number given the market slippage.

draw_down 9y ago
I think the "vanishing" strongly implies that it was never there.
everdev 9y ago
From the title: > $100B in Market Value When the market price of an assets drops, it loses market value.
- brndnmtthws 9y ago
  Wrong. The market value is only what you get for it when you sell it. It's a subtle but very important difference. A good analogy is comparing the advertised price of a used car versus what you actually get for it. You might think it's worth $5k, but there's only 1 person who wants to buy it and they're only willing to pay $4k, so it's actually worth $4k, not $5k. It doesn't matter if someone else sold theirs for $5k.
  - solotronics 9y ago
    maybe a more accurate metric be average sell value over period of time or number of trades?
  - Klathmon 9y ago
    I hear this all the time, but does anyone really think that the market cap is what you can really get for an asset? It's a metric, one as "untrue" as an average or median. It's not a contract, and you won't get that if you change the market, which selling and buying does. I don't think that means we shouldn't use it as a metric to use to get information from for comparisons. And I don't think that it's bad journalism to say that the market cap dropped by $100B when it did, even if that doesn't equate to $100 billion being burned.
    - brndnmtthws 9y ago
      The point is that no one really knows the actual value of any asset until you've sold it. You can only measure value in the past; future values can only be guessed (excluding things like future contracts). This is true regardless of whether we're talking about Bitcoin, stocks, metals, houses, chickens, or seashells. Most of these stupid market movement predictions are equivalent to astrology and only exist because WSJ and others have nothing interesting to say. The daily market fluctuations are pretty much random, and this has been proven many times over.
      - Klathmon 9y ago
        I completely agree about "market movement predictions", but market cap is not a prediction, it's a metric, a statistic, a made up value that can help you compare one asset to another. It is used like a unitless measuring stick, not a prediction on what you can get if you sold. And I'll argue that it does it's job fairly well. It's difficult to "game", and can help give you some information about an asset. It doesn't say everything, it can't tell you if it's stable, or if it's being used or not, or if it's a scam. It's just a tool, a metric, something that you use with a bunch of other tools to get an idea of the ecosystem. I would be happy to "rename" it to a unitless value that doesn't imply a "total worth", but that ship has sailed, and it's not going to be possible, so we have what we have.
  - supercanuck 9y ago
    I'm not exactly sure what you are arguing but the value of these coins were trading about 30% lower, so using your definition above, the market value was clearly lower as can be seen by actual market activity. The price has since recovered. I don't think anybody is claiming the number on Coin Market Cap is the actual market value because it is simply a metric derived from aggregating across multiple, very volatile exchanges. EDIT: ok i saw your comment below, and it seems you are arguing, albeit very aggressively, that daily market fluctuations are random and cannot be attributed to an actual event, such as this one?
  - everdev 9y ago
    Wrong. https://www.investopedia.com/terms/m/marketvalue.asp https://www.investopedia.com/terms/m/marketvalue.asp Market value definition: > obtained by multiplying the number of its outstanding shares by the current share price The reality of selling has nothing to do with it. It's just a math equation.
    - brndnmtthws 9y ago
      How can a thing which never existed to begin with vanish? There wasn't $100B sitting around in a bank account waiting to be claimed, which then suddenly evaporated. Also investopedia isn't exactly a high quality source.
      - DennisP 9y ago
        It's not only dollars that have value. Lots of assets do, like company shares. In the stock market, if a company has ten million shares at $100 each we say the company is worth a billion dollars, even though that $100 price is only the most recent transaction. We say that because if price times quantity didn't match what the overall market thinks the whole company is worth, the price would quickly correct until it did.
      - jawilson2 9y ago
        What about the Financial Times? http://lexicon.ft.com/Term?term=market-capitalisation http://lexicon.ft.com/Term?term=market-capitalisation "Market capitalisation or market cap is the market value of a company's issued share capital – in other words. the number of shares multiplied by the current price of those shares on the stock market."
      - everdev 9y ago
        $100B was created on paper and lost on paper. Net worth is the same concept. Jeff Bezos net worth is calculated based on how much his assets are theoretically worth based on current fair market prices. He doesn't have to sell all his assets to determine his net worth. People don't like the "lost $100B in market value" part, but it is accurate since market value is calculated on paper.
    - 9y ago
- ddebernardy 9y ago
  There are a bunch of websites that offer to value this or that website. I once plugged an old website of mine in there and it was well over $1M. I was like - please tell me who the buyer is, I'd sell right away. "Market value" doesn't mean squat if you've no buyer in front.
  - everdev 9y ago
    Right, market value != Money in the bank But, market value means the market price * total assets. So, market value is erased when market prices drop and created when they rise. How you interpret a ride or drop in market value is up to you. It's just like saying my house was appraised at $300k. That doesn't mean you will get an offer at that price, but it's not accurate to say that the appraisal value isn't $300k unless you find a buyer at that price. The appraisal price and purchase price are separate.
- jstanley 9y ago
  But the market price didn't drop. An aggregator changed its reporting methodology. Coinmarketcap is a price aggregator, not a market. All of the markets are unaffected, it just happened that the markets that got removed from the aggregator are the ones that had the highest prices. But they're still there. You can still trade on them the same as before.
  - DennisP 9y ago
    Actual prices on exchanges did drop temporarily, apparently because a lot of people panicked.
frgtpsswrdlame 9y ago
>It's facetious (and bad 'journalism') to claim $100B vanished. It's certainly not bad journalism, this is how all sorts of assets are reported on. Market Cap isn't a perfect metric but it's pretty good and keeps us from saying things like "AMZN is down 50%" when they do a stock split. In the sense that yesterday if you summed up what all the individual holders saw when they checked their accounts you'd get $200b and today if you did the same you'd get $100b then $100b did vanish.
- soup10 9y ago
  If I bought monopoly money for $1B then later am able to sell 10% for 200M. I might believe and tell people my stash is now worth $2B, but most reasonable people would say your stash is worth $0 because its monopoly money and you got scammed for the first $1B.
- runeks 9y ago
  It’s not black and white either, though. If 10% of stock holders are able to cash out without changing the price significantly, market cap would be an inaccurate measure, but not that far off. If, on the other hand, only 0.1% of holders of some token are able to cash out without significantly affecting the price, the value they think they have just isn’t there (to a much larger extent than the case above). To use an extreme example: if I issue 2^100 tokens, and manage to get a couple of orders in an order book with a mid (and “last trade”) price of 0.1 cent, and this price goes to zero, did 1.268^27 dollars of market value just vanish, or were the holders of this token misinformed? The inherent inaccuracy of market cap value is inversely proportional to liquidity: the less liquid the asset, the further away from reality market cap value is. And these tiny tokens are some of the least liquid assets in existence.
- empath75 9y ago
  If I buy 100% of Amazon stock, I've got something that's going to be roughly worth the market cap of the stock. If I buy 100% of bitcoin, I've got nothing. Nobody will be interested in a token that can't be used for anything any more.
ringaroundthetx 9y ago
This is the same standard all assets are held at. Your point is moot. That ship sailed 100 years ago.
michaelbuckbee 9y ago
I keep asking if there is a better term than than straight MarketValue (shares * share price). Quoting from a previous comment of mine: 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. Can an economist or serious financial person please tell me what this term is called?
- XR0CSWV3h3kZWg 9y ago
  24h volume is related. For instance NEM has a market cap of 14B, but 24h volume puts it at 62M where as LTC has a market cap of 13B, but 24h volume of 0.9B. If you tried to liquidate the same amount (denominated in USD) in NEM and LTC you'd see much more price slippage in LTC than in NEM.
  - npongratz 9y ago
    I'm probably misunderstanding something fundamental. If there's 14 times more 24h volume in LTC than NEM, wouldn't a seller experience more slippage in NEM?
- gnopgnip 9y ago
  Market cap is just one way of determining the value. You should consider others when making any investment/gamble. Many of the traditional ways of valuing a company can be applied to value a crypto currency. If the market cap is much higher than the net present value or discounted cash flow that is a sign of an overvaluation or bubble.
Udik 9y ago
> If you owned a significant portion of all the coins in the world, and tried to sell them all at once, you wouldn't end up with number_of_coins * price Note that the same would happen if everybody started dumping their wealth in whatever form: shares, real estate, and fiat money, even hard bills. What we call value is just the promise that somebody, at some future moment, will be willing to exchange what we have for something else (food, goods, houses, or of course any other different store of value). If everybody is trying to get rid of something, the value of that something just drops to zero.
trhway 9y ago
> It was never there to begin with: market cap isn't something you can cash in on. ... If you owned a significant portion of all the coins in the world, and tried to sell them all at once ... until of course you can take a loan collateralized by the asset. Or get/sell some CDS/future/option based on the asset - that way you can even work with amounts larger than the market cap.

draw_down 9y ago

I think the "vanishing" strongly implies that it was never there.

everdev 9y ago

From the title: > $100B in Market Value When the market price of an assets drops, it loses market value.

brndnmtthws 9y ago
Wrong. The market value is only what you get for it when you sell it. It's a subtle but very important difference. A good analogy is comparing the advertised price of a used car versus what you actually get for it. You might think it's worth $5k, but there's only 1 person who wants to buy it and they're only willing to pay $4k, so it's actually worth $4k, not $5k. It doesn't matter if someone else sold theirs for $5k.
- solotronics 9y ago
  maybe a more accurate metric be average sell value over period of time or number of trades?
- Klathmon 9y ago
  I hear this all the time, but does anyone really think that the market cap is what you can really get for an asset? It's a metric, one as "untrue" as an average or median. It's not a contract, and you won't get that if you change the market, which selling and buying does. I don't think that means we shouldn't use it as a metric to use to get information from for comparisons. And I don't think that it's bad journalism to say that the market cap dropped by $100B when it did, even if that doesn't equate to $100 billion being burned.
  - brndnmtthws 9y ago
    The point is that no one really knows the actual value of any asset until you've sold it. You can only measure value in the past; future values can only be guessed (excluding things like future contracts). This is true regardless of whether we're talking about Bitcoin, stocks, metals, houses, chickens, or seashells. Most of these stupid market movement predictions are equivalent to astrology and only exist because WSJ and others have nothing interesting to say. The daily market fluctuations are pretty much random, and this has been proven many times over.
    - Klathmon 9y ago
      I completely agree about "market movement predictions", but market cap is not a prediction, it's a metric, a statistic, a made up value that can help you compare one asset to another. It is used like a unitless measuring stick, not a prediction on what you can get if you sold. And I'll argue that it does it's job fairly well. It's difficult to "game", and can help give you some information about an asset. It doesn't say everything, it can't tell you if it's stable, or if it's being used or not, or if it's a scam. It's just a tool, a metric, something that you use with a bunch of other tools to get an idea of the ecosystem. I would be happy to "rename" it to a unitless value that doesn't imply a "total worth", but that ship has sailed, and it's not going to be possible, so we have what we have.
- supercanuck 9y ago
  I'm not exactly sure what you are arguing but the value of these coins were trading about 30% lower, so using your definition above, the market value was clearly lower as can be seen by actual market activity. The price has since recovered. I don't think anybody is claiming the number on Coin Market Cap is the actual market value because it is simply a metric derived from aggregating across multiple, very volatile exchanges. EDIT: ok i saw your comment below, and it seems you are arguing, albeit very aggressively, that daily market fluctuations are random and cannot be attributed to an actual event, such as this one?
- everdev 9y ago
  Wrong. https://www.investopedia.com/terms/m/marketvalue.asp https://www.investopedia.com/terms/m/marketvalue.asp Market value definition: > obtained by multiplying the number of its outstanding shares by the current share price The reality of selling has nothing to do with it. It's just a math equation.
  - brndnmtthws 9y ago
    How can a thing which never existed to begin with vanish? There wasn't $100B sitting around in a bank account waiting to be claimed, which then suddenly evaporated. Also investopedia isn't exactly a high quality source.
    - DennisP 9y ago
      It's not only dollars that have value. Lots of assets do, like company shares. In the stock market, if a company has ten million shares at $100 each we say the company is worth a billion dollars, even though that $100 price is only the most recent transaction. We say that because if price times quantity didn't match what the overall market thinks the whole company is worth, the price would quickly correct until it did.
    - jawilson2 9y ago
      What about the Financial Times? http://lexicon.ft.com/Term?term=market-capitalisation http://lexicon.ft.com/Term?term=market-capitalisation "Market capitalisation or market cap is the market value of a company's issued share capital – in other words. the number of shares multiplied by the current price of those shares on the stock market."
    - everdev 9y ago
      $100B was created on paper and lost on paper. Net worth is the same concept. Jeff Bezos net worth is calculated based on how much his assets are theoretically worth based on current fair market prices. He doesn't have to sell all his assets to determine his net worth. People don't like the "lost $100B in market value" part, but it is accurate since market value is calculated on paper.
  - 9y ago
ddebernardy 9y ago
There are a bunch of websites that offer to value this or that website. I once plugged an old website of mine in there and it was well over $1M. I was like - please tell me who the buyer is, I'd sell right away. "Market value" doesn't mean squat if you've no buyer in front.
- everdev 9y ago
  Right, market value != Money in the bank But, market value means the market price * total assets. So, market value is erased when market prices drop and created when they rise. How you interpret a ride or drop in market value is up to you. It's just like saying my house was appraised at $300k. That doesn't mean you will get an offer at that price, but it's not accurate to say that the appraisal value isn't $300k unless you find a buyer at that price. The appraisal price and purchase price are separate.
jstanley 9y ago
But the market price didn't drop. An aggregator changed its reporting methodology. Coinmarketcap is a price aggregator, not a market. All of the markets are unaffected, it just happened that the markets that got removed from the aggregator are the ones that had the highest prices. But they're still there. You can still trade on them the same as before.
- DennisP 9y ago
  Actual prices on exchanges did drop temporarily, apparently because a lot of people panicked.

frgtpsswrdlame 9y ago

>It's facetious (and bad 'journalism') to claim $100B vanished. It's certainly not bad journalism, this is how all sorts of assets are reported on. Market Cap isn't a perfect metric but it's pretty good and keeps us from saying things like "AMZN is down 50%" when they do a stock split. In the sense that yesterday if you summed up what all the individual holders saw when they checked their accounts you'd get $200b and today if you did the same you'd get $100b then $100b did vanish.

soup10 9y ago
If I bought monopoly money for $1B then later am able to sell 10% for 200M. I might believe and tell people my stash is now worth $2B, but most reasonable people would say your stash is worth $0 because its monopoly money and you got scammed for the first $1B.
runeks 9y ago
It’s not black and white either, though. If 10% of stock holders are able to cash out without changing the price significantly, market cap would be an inaccurate measure, but not that far off. If, on the other hand, only 0.1% of holders of some token are able to cash out without significantly affecting the price, the value they think they have just isn’t there (to a much larger extent than the case above). To use an extreme example: if I issue 2^100 tokens, and manage to get a couple of orders in an order book with a mid (and “last trade”) price of 0.1 cent, and this price goes to zero, did 1.268^27 dollars of market value just vanish, or were the holders of this token misinformed? The inherent inaccuracy of market cap value is inversely proportional to liquidity: the less liquid the asset, the further away from reality market cap value is. And these tiny tokens are some of the least liquid assets in existence.
empath75 9y ago
If I buy 100% of Amazon stock, I've got something that's going to be roughly worth the market cap of the stock. If I buy 100% of bitcoin, I've got nothing. Nobody will be interested in a token that can't be used for anything any more.

ringaroundthetx 9y ago

This is the same standard all assets are held at. Your point is moot. That ship sailed 100 years ago.

michaelbuckbee 9y ago

I keep asking if there is a better term than than straight MarketValue (shares * share price). Quoting from a previous comment of mine: 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. Can an economist or serious financial person please tell me what this term is called?

XR0CSWV3h3kZWg 9y ago
24h volume is related. For instance NEM has a market cap of 14B, but 24h volume puts it at 62M where as LTC has a market cap of 13B, but 24h volume of 0.9B. If you tried to liquidate the same amount (denominated in USD) in NEM and LTC you'd see much more price slippage in LTC than in NEM.
- npongratz 9y ago
  I'm probably misunderstanding something fundamental. If there's 14 times more 24h volume in LTC than NEM, wouldn't a seller experience more slippage in NEM?
gnopgnip 9y ago
Market cap is just one way of determining the value. You should consider others when making any investment/gamble. Many of the traditional ways of valuing a company can be applied to value a crypto currency. If the market cap is much higher than the net present value or discounted cash flow that is a sign of an overvaluation or bubble.

Udik 9y ago

> If you owned a significant portion of all the coins in the world, and tried to sell them all at once, you wouldn't end up with number_of_coins * price Note that the same would happen if everybody started dumping their wealth in whatever form: shares, real estate, and fiat money, even hard bills. What we call value is just the promise that somebody, at some future moment, will be willing to exchange what we have for something else (food, goods, houses, or of course any other different store of value). If everybody is trying to get rid of something, the value of that something just drops to zero.

trhway 9y ago

> It was never there to begin with: market cap isn't something you can cash in on. ... If you owned a significant portion of all the coins in the world, and tried to sell them all at once ... until of course you can take a loan collateralized by the asset. Or get/sell some CDS/future/option based on the asset - that way you can even work with amounts larger than the market cap.