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The market cap for UNH isn't calculated using future cash flows. The market cap for any security, by definition, is price-per-security * number-of-securities. S

by whack 7y ago

The market cap for UNH isn't calculated using future cash flows. The market cap for any security, by definition, is price-per-security * number-of-securities. Similar valuations also exist for gold-funds, which also have no cash flows. You can argue that asset prices should be derived from future cash flows, and hence, both Bitcoin and gold should be almost worthless. But that has nothing to do with the formula for computing any entity's market cap

JumpCrisscross 7y ago
> The market cap for any security, by definition, is price-per-security number-of-securities Market cap is an equities concept. The market value of a series of bonds isn't the issuance's market cap. The notional value of all options on a symbol is only useful to operations/settlement folk. For Bitcoin, "market cap" is meaningless. It's too thinly and opaquely traded. Better would be flow of funds, i.e. value of new money flowing into and out of the system. Put another way, if you bought all the shares in a company, you'd have the company. If you bought all the bonds of a company, you'd own the debt. The aggregates have meaning. If you bought every Bitcoin in existence (or dollar, for that matter), you would have nothing.
- account73466 7y ago
  >> It's too thinly and opaquely traded That claim about "thinly" contradicts the numbers given in my post above.
  - JumpCrisscross 7y ago
    > That claim about "thinly" contradicts the numbers given in my post above Most Bitcoin volume is non-economic [1]. Some of it is fraudulent printing. Some of it is wash trading. That said, I don't doubt Binance's figures. The problem with taking a few trades and multiplying it by the outstanding coinage goes back to the aggregate being meaningless. [1] https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5574233-185408.pdf https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...
    - account73466 7y ago
      More than 90% of Bitcoin volume is fake, there is no question about that. However, if you believe Binance's figures then these figures alone are sufficient to support Bitcoin's current market cap in the sense that its volume / market cap is about the same as for well-traded stocks from S&P500. In other words, the claim that the volume is too small is not well supported because it is as small as for other financial assets, e.g., between 0.2-1% of market cap per day.
      - JumpCrisscross 7y ago
        > if you believe Binance's figures then these figures alone are sufficient to support Bitcoin's current market cap in the sense that it market cap / volume is about the same as for well-traded stocks from S&P500 You're defending a metric by citing the metric. The only utility for market cap with Bitcoin would appear to be to make arguments like this one. Comparing a nonsensical ratio to a similarly-sounding meaningful one. To someone who isn't thinking through what the numbers and their resulting ratios mean, I suppose it sounds authoritative.
        account73466 7y ago
        >> To someone who isn't thinking through what the numbers and their resulting ratios mean, I suppose it sounds authoritative. Is it an insult, Arnav? Thousands of scientists use my research and they would probably disagree that I am "someone who isn't thinking through what the numbers and their resulting ratios mean".
        JumpCrisscross 7y ago
        Not an insult. An observation regarding the metric. The product of Bitcoin's price and its current circulation is financially meaningless. It's meaningless for fundamental reasons. (It’s even more meaningless to compare it to an equity market cap.) That doesn't mean it is useless. People talk about it because it's a marketable metric. But so is community-adjusted Ebitda or the theoretical value of a comet's mineral wealth derived from multiplying its mass by the latest commodity trade. These are narrative tools. Not analytic ones. Both are okay, but they have different roles.
- noxer 7y ago
  There is no new money in flow or out flow in bitcoin. It's a zero sum game. If someone buys bitcoin his money goes to the person(s) who sold. Nothing goes "in Bitcoin". I agree mcap is meaningless just like they mcap of USD/EUR/GOLD etc. It doesn't matter if is large or small it just has no meaning just like the price per unit has no meaning. Mcap is just a multiplication of the price.
  - account73466 7y ago
    >> Mcap is just a multiplication of the price. Who claimed the opposite?
    - noxer 7y ago
      No one? But why would anyone "see" any information in the mcap value if the price value doesn't have that info a multiplication of it certainly doesn't have it either. Mcap is literally the price tag on all coins while the price tag on a single coins already is arbitrary and has no meaning.
mikeyouse 7y ago
> The market cap for UNH isn't calculated using future cash flows. Yes it is... > The market cap for any security, by definition, is price-per-security number-of-securities.* How do you think you get the price-per-security for a stock? If Apple has $100B in cash, why is their Market Cap $1.2T? This is why people are skeptical of most things crypto... it really seems like there's hardly anyone in the community who understand fundamental financial concepts. > You can argue that asset prices should be derived from future cash flows, and hence, both Bitcoin and gold should be almost worthless. No - I'd just argue that it's completely misleading to try and assign a "market cap" to any asset other than a security and that people who rely on them are doing so to mislead rather to inform.
- johnwheeler 7y ago
  Again, market cap _is_ price per share multiplied by shares outstanding. In practice, the amount of cash a company has has nothing to do with its market capitalization. There are companies with low cash, major debt, and sky high valuations. Stocks are supposed to be valued by discounted cash flows, but that doesn’t mean they are, by any means. The future values of companies are highly subjective. Technically, cash doesn’t factor into future cash flows so much as it does book or liquidation value. > This is why people are skeptical of most things crypto... it really seems like there's hardly anyone in the community who understand fundamental financial concepts. I would argue one reason people are skeptical (annoyed is probably a better word) of crypto because it is full of folks who purport to know fundamental and even advanced financial concepts who are actually deluding themselves.
danans 7y ago
> You can argue that asset prices should be derived from future cash flows, and hence, both Bitcoin and gold should be almost worthless. Which points to what IMO underpins whatever Bitcoin's underlying value is: a fear - or for some a hope - that typical vehicles investments will have precipitously declining future cash flow. In that way it's like gold (minus the part about being pretty and useful for selling overpriced audio cables - is that still a thing?). Unlike gold, though, it's in a way harder to secure, either by individuals or governments, because it isn't held behind physical security measures. Rather it's subject to the same large scale attacks as any other information on the Internet.

by whack 7y ago

JumpCrisscross 7y ago

> The market cap for any security, by definition, is price-per-security number-of-securities Market cap is an equities concept. The market value of a series of bonds isn't the issuance's market cap. The notional value of all options on a symbol is only useful to operations/settlement folk. For Bitcoin, "market cap" is meaningless. It's too thinly and opaquely traded. Better would be flow of funds, i.e. value of new money flowing into and out of the system. Put another way, if you bought all the shares in a company, you'd have the company. If you bought all the bonds of a company, you'd own the debt. The aggregates have meaning. If you bought every Bitcoin in existence (or dollar, for that matter), you would have nothing.

account73466 7y ago
>> It's too thinly and opaquely traded That claim about "thinly" contradicts the numbers given in my post above.
- JumpCrisscross 7y ago
  > That claim about "thinly" contradicts the numbers given in my post above Most Bitcoin volume is non-economic [1]. Some of it is fraudulent printing. Some of it is wash trading. That said, I don't doubt Binance's figures. The problem with taking a few trades and multiplying it by the outstanding coinage goes back to the aggregate being meaningless. [1] https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5574233-185408.pdf https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...
  - account73466 7y ago
    More than 90% of Bitcoin volume is fake, there is no question about that. However, if you believe Binance's figures then these figures alone are sufficient to support Bitcoin's current market cap in the sense that its volume / market cap is about the same as for well-traded stocks from S&P500. In other words, the claim that the volume is too small is not well supported because it is as small as for other financial assets, e.g., between 0.2-1% of market cap per day.
    - JumpCrisscross 7y ago
      > if you believe Binance's figures then these figures alone are sufficient to support Bitcoin's current market cap in the sense that it market cap / volume is about the same as for well-traded stocks from S&P500 You're defending a metric by citing the metric. The only utility for market cap with Bitcoin would appear to be to make arguments like this one. Comparing a nonsensical ratio to a similarly-sounding meaningful one. To someone who isn't thinking through what the numbers and their resulting ratios mean, I suppose it sounds authoritative.
      - account73466 7y ago
        >> To someone who isn't thinking through what the numbers and their resulting ratios mean, I suppose it sounds authoritative. Is it an insult, Arnav? Thousands of scientists use my research and they would probably disagree that I am "someone who isn't thinking through what the numbers and their resulting ratios mean".
        JumpCrisscross 7y ago
        Not an insult. An observation regarding the metric. The product of Bitcoin's price and its current circulation is financially meaningless. It's meaningless for fundamental reasons. (It’s even more meaningless to compare it to an equity market cap.) That doesn't mean it is useless. People talk about it because it's a marketable metric. But so is community-adjusted Ebitda or the theoretical value of a comet's mineral wealth derived from multiplying its mass by the latest commodity trade. These are narrative tools. Not analytic ones. Both are okay, but they have different roles.
noxer 7y ago
There is no new money in flow or out flow in bitcoin. It's a zero sum game. If someone buys bitcoin his money goes to the person(s) who sold. Nothing goes "in Bitcoin". I agree mcap is meaningless just like they mcap of USD/EUR/GOLD etc. It doesn't matter if is large or small it just has no meaning just like the price per unit has no meaning. Mcap is just a multiplication of the price.
- account73466 7y ago
  >> Mcap is just a multiplication of the price. Who claimed the opposite?
  - noxer 7y ago
    No one? But why would anyone "see" any information in the mcap value if the price value doesn't have that info a multiplication of it certainly doesn't have it either. Mcap is literally the price tag on all coins while the price tag on a single coins already is arbitrary and has no meaning.

mikeyouse 7y ago

> The market cap for UNH isn't calculated using future cash flows. Yes it is... > The market cap for any security, by definition, is price-per-security number-of-securities.* How do you think you get the price-per-security for a stock? If Apple has $100B in cash, why is their Market Cap $1.2T? This is why people are skeptical of most things crypto... it really seems like there's hardly anyone in the community who understand fundamental financial concepts. > You can argue that asset prices should be derived from future cash flows, and hence, both Bitcoin and gold should be almost worthless. No - I'd just argue that it's completely misleading to try and assign a "market cap" to any asset other than a security and that people who rely on them are doing so to mislead rather to inform.

johnwheeler 7y ago
Again, market cap _is_ price per share multiplied by shares outstanding. In practice, the amount of cash a company has has nothing to do with its market capitalization. There are companies with low cash, major debt, and sky high valuations. Stocks are supposed to be valued by discounted cash flows, but that doesn’t mean they are, by any means. The future values of companies are highly subjective. Technically, cash doesn’t factor into future cash flows so much as it does book or liquidation value. > This is why people are skeptical of most things crypto... it really seems like there's hardly anyone in the community who understand fundamental financial concepts. I would argue one reason people are skeptical (annoyed is probably a better word) of crypto because it is full of folks who purport to know fundamental and even advanced financial concepts who are actually deluding themselves.

danans 7y ago

> You can argue that asset prices should be derived from future cash flows, and hence, both Bitcoin and gold should be almost worthless. Which points to what IMO underpins whatever Bitcoin's underlying value is: a fear - or for some a hope - that typical vehicles investments will have precipitously declining future cash flow. In that way it's like gold (minus the part about being pretty and useful for selling overpriced audio cables - is that still a thing?). Unlike gold, though, it's in a way harder to secure, either by individuals or governments, because it isn't held behind physical security measures. Rather it's subject to the same large scale attacks as any other information on the Internet.