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Where did all this money go? It can't disappear just like that, can it? I can't withdraw more than a few K per week with crypto exchanges. How can $300B evapor

• lotsofpulp 5y ago
  Because $300B was never there. A quantity of a certain thing times its most recent sale price per unit was calculated to be a proxy of the trade-able value of what could have been there.
  • john37386 5y ago
    well the blockchain won't agree with this. All transactions can be verified. Maybe I missed something.
    • deleted 5y ago
      [deleted]
    • bildung 5y ago
      Well all this price action only happens in the databases of the exchanges, not on the blockchain. And on the exchanges only a miniscule share of all coins get traded. The "market cap" is then only extrapolated. E.g. Bitfinex, which seems to have the most volume, only saw 40k bitcoin traded, in sum, for today, which was less than $2B USD.
    • deleted 5y ago
      [deleted]
    • stevehawk 5y ago
      he's talking about a philosophical idea and you're talking about a technical one
      • lotsofpulp 5y ago
        No, I am talking about the technical one. $300B technically did not evaporate because $300B technically were never there.
    • NovemberWhiskey 5y ago
      The blockchain tells you who owns the bitcoin, but it has nothing at all to do with the price at which people will exchange money for bitcoin.
    • xiaomai 5y ago
      The blockchain has nothing to do with dollars. The "value" that disappeared has always been illusory.
    • Ekaros 5y ago
      Exact same amount of BTC is still around, or more actually. What it is valued in dollars is different... Valuation was lost. Not actual coins. That works with any stocks...
    • Jtsummers 5y ago
      The record of transactions are only of BTC Wallet->BTC Wallet transactions. They say nothing about how much they're worth in other currencies or materials. And even if they did, like we can get essentially all stock market transaction data (stock X sold for Y at time T), it doesn't prevent the value from going down (or up) independently of that historical price. It just creates certain points of resistance where it's harder for it to move beyond, but it can still happen. See the various stock market crashes in the past.
    • bryanlarsen 5y ago
      If I start a bogus company, issue a million shares to myself and then sell a single share to my buddy for $1, then my company is "worth" $1M. The assumption is that the sale is a fair price and indicative of what other shares would sell for. If he then sells that share on for $50, the company is "worth" $50M. If that share is then sold for a penny, the company is now worth $10K. The $50M didn't "disappear", it didn't really exist in the first place.
    • schmichael 5y ago
      USD transactions aren’t on the blockchain. You have no idea how much liquidity there is. Wash trading coins is known to be rampant, so even the smallest sell off to USD may cause a massive price drop. Don’t worry, the unregulated exchanges can wash trade the prices right back up again. Just don’t be left holding a bag when the USD liquidity runs dry.
    • seniorsassycat 5y ago
      The blockchain tracks bitcoin transactions not USD. The USD price of Bitcoin can change without any on chain transactions. Market cap is last price times total supply. Only a few coins are sold each day compared to the total supply so changes in price have a magnified affect on market cap. For example a blockchain has 10 coins and a fixed price initial sale at 1$ per coin. All coins are sold so the market cap is 10$ which refects the total money sunk into the coin. But now someone sells their coin for 2$. The market cap is now 20$ but only 11$ we're spent on the coins.
• pope_meat 5y ago
  Its like a stock market crash, one day everything is fine, the next its the beginning of the great depression. Welcome to the world of speculation, I hope you enjoy your stay in the house of cards.
  • cblconfederate 5y ago
    House of cards or not it's the only house left after moneyprinting destroyed the soundness of cash/bonds
    • sofard 5y ago
      The "only" thing left? Housing/land has long been the most durable store of value in history and that wont change. It's not as liquid as Crypto and requires laws to enforce private property. But if society collapses, we'll have bigger things to worry about and even Bitcoin can be "seized" via violence/coercion.
      • cblconfederate 5y ago
        > and that wont change depends on location/country etc. Houses are out of reach for most millenials worldwide and i don't see that changing either
• deleted 5y ago
  [deleted]
• DebtDeflation 5y ago
  It didn't "go" anywhere. The price of a financial asset is just the price at which the last exchange took place. I could buy a Bitcoin for $100K right now, and that would be the price, at least until the next transaction. Likewise, someone could sell one for $10K and that would now be the price. In a thick market, one with many buyers and sellers and lots of transactions happening all of the time, you can be reasonably confident that if you go to sell something you will receive something reasonably close to the current price. In a thin market you may get a very different price when you go to buy and sell. A persistent criticism of crypto markets is that they APPEAR to be thick but that most of the trades happening are just bots buying and selling on behalf of a very small number of actual participants in order to give the appearance of high volumes and that people will be in for a rude awakening if they ever try to exit out of a substantial position (the price they receive may be a fraction of the current market price, assuming they are even able to find a buyer at all).
  • reginold 5y ago
    Oh interesting, so it's all bot trading? Any reason this wouldn't apply to the NYSE or NASDAQ as well?
    • endisneigh 5y ago
      it does
    • syntheticcdo 5y ago
      NYSE and NASDAQ are regulated exchanges with stable transaction prices (ie- regulatory taxes and fees). Unscrupulous crypto exchanges can generate "volume" out of thin air without any repercussions.
      • reginold 5y ago
        Oh so you mean it's not bot trading, it's actually exchanges lying about volume and transactions? I could see this. Somewhere else it was pointed out during this "crash" that it was all off-chain, blocks and mempool were relatively empty, so the crash was on exchanges.
• Rury 5y ago
  Because: <Market Cap> = <Number of Shares> * <Price per share> Market cap can change a lot, using very little money, depending on how many units or shares there are. For example: 1 million MC = 1 million shares * 1$ cost per share If one person is suddenly able to sell 1 share at 2$, market cap immediately doubled to 2 Million, using only 2$.
• carabiner 5y ago
  A block of gold is worth $1k today, tomorrow it's $500. Where did that money go? It's just the price people are willing to pay. Maybe the seller found 100 more blocks of gold and is running out of storage.
• Ekaros 5y ago
  Money doesn't need to go anywhere. There could still be same amount of both dollars and bitcoins on accounts in exchange. Just the price of the trading pair moved. It is not like when you move either bitcoin or dollars to exchange you have to immediately trade with it or convert it to other.
• parsimo2010 5y ago
  Monetary transfers aren’t what create the valuation in the first place, so it stands to reason the value can also fall without monetary transfers taking place. If just a few parties trade one-trillionth of an asset at $1, then we say that asset is worth a trillion dollars because we extrapolated. If the next trillionth sells for $2, we’ve just doubled the valuation to two trillion dollars, but that amount never changed hands, and at worst only one person only ever valued the asset above a trillion dollars. If the next trillionth sells for $0.50 all of a sudden we’ve wiped $1.5 trillion in valuation off the face of the Earth but only two dollars and fifty cents has changed hands in this example. In broad terms, that example explains what is going on here. The $300B that “evaporated” mostly never existed in the first place. The order books are not very deep and the valuation of Bitcoin looks great as long as everyone hodls and refuse to let the price go down- at the expense of trading volume. Once people get nervous and decide they want to try to turn their imaginary crypto gains into real money to cover losses in the slightly less imaginary stock market, the selling price tumbles because there aren’t that many bids at the previous price. So the price moves down without much volume being traded.
• ohmanjjj 5y ago
  Crypto “market cap” is fiction. In a blink of an eye 25% is lost, and not because 25% of the market cap was withdrawn.
  • Ekaros 5y ago
    Most fun thing is to think how much of the underlining thing for marketcap is even on market... With bitcoin it is known that decent fraction hasn't moved in years. So why is this even included in calculation? Might even make sense to calculate how much is on cold wallets of known entities and then add to those how many actual coins have moved in let's say in year. Then multiply this number by price to get more realistic idea of market cap.
  • everfree 5y ago
    All market caps of all assets are "fiction" in the sense that they don't measure the total amount of money that all units of the asset could fetch on the market.
    • ohmanjjj 5y ago
      True. Also leverage further distorts the true market cap. With Bitcoin $100k can easily be used to buy $800k worth of Bitcoin or more in some platforms. And yes, same is true for the stock market. Everything is made up. Nothing is real.
• missblit 5y ago
  The price of bitcoin is just the most someone's willing to pay for it right now. If it dropped to zero it wouldn't mean any bitcoin or USD disappeared, just that no one wants to buy it; mathematically everything still adds up. The 300B number comes from market cap. Take the current price of BTC, multiply it by the number of BTC, and call that the value of bitcoin as a whole. But that's just an overly simple guess to the total value, not a mathematical fact. Reality is of course more complicated: Imagine the BTC market as an order book. Maybe there's 10 people with an order to buy for 6k or less, 3 people with an order to buy at 5.7k 5 people with an order to buy at 5.5k or less, etc. Then if someone sells 18 bitcoin they'll get 6k for the first 10, 5.7k for the next 3, and 5.5k for the rest; while causing the price to lower from 6k to 5.5k. Since there's way more BTC than this hypothetical person sold, it causes the market cap to lower much more than the amount of money they made. And of course this too isn't static in the real world. Some people may sell when they see the price going down, some people may _buy_ when they see the price going down, and general unregulated chaos.
• CuriousCosmic 5y ago
  It can move into stablecoins or the exchange's fiat accounts. At the same time however you can't outright move a bunch of money off an exchange unless your account is rated for that. I don't particularly move a lot of value in cryptocurrency (I'm not remotely close to wealthy, just a SWE in an east coast, non-FAANG job) but I have a 250k USD daily withdraw limit on my exchange account. At least on my main exchange, if you set up certain security restrictions(2FA, wallet quarantine periods, etc), do KYC, and have an active account for X duration in time, you get larger withdraw limits and access to higher trade volume tiers. It's all about how much risk you present to the exchange and the associated financial organisations. I represent a very low risk level (I'm very boring and generally risk adverse) so I get access to pretty high withdrawal and deposit volumes. I don't leverage them but if I wanted to I could.
• vmception 5y ago
  A significant portion is sold into stablecoins which are other cryptos. If the stablecoins go above their peg, then it is more profitable to mint the stablecoin at the issuer with dollars you own on the exchange, and sell the stablecoin immediately to the panic sellers clamoring for stable value. Many other assets are merely priced in bitcoin and their dollar value can fall without a single trade occurring. This needs to be fixed sector wide. And finally, people have unlimited withdrawal limits to fiat or crypto from exchanges. You need to convince your exchange to raise yours or get another exchange. OTC desks have no limit which is what institutional traders use.
• bogota 5y ago
  Market cap is not real money
• jbay808 5y ago
  As I understand it, the market cap of an asset is the marginal price times the quantity. But the total value is the integral of the marginal price * d(quantity). These can differ greatly. If I buy one Bitcoin on the market for $1, and then another Bitcoin on the market for $100, I now have two Bitcoins, with a market cap of $200, which I only paid $101 for. It's like $99 just appeared out of thin air! But that $99 might disappear again when I sell my bitcoins. After selling one of them, the market price might plummet back down to $1. When someone on your street sells their house for $1 million, the paper value of the neighbourhood might shoot up by $10 million, just from all the nearby houses being revalued at that latest price, despite only $1 million actually changing hands. The same can happen in reverse, too.
• jcranmer 5y ago
  Market capitalization is a reflection of the total number of outstanding shares (i.e., Bitcoin) times the last price someone paid to by a single share (i.e., market value). There is no inherent relationship between market capitalization and the total "value" of all of the assets, as might be indicated by, say, the total money spent by each Bitcoin holder to acquire their share of Bitcoin (call this, say, "total capital basis"). Note that this applies to all asset classes, although many asset classes do have some rules of thumb that can indicate if the current market value seems overvalued or undervalued. (It should be noted that as of late, these rules of thumb suggest that many asset classes range from "overvalued" to "holy hell, where is this valuation coming from‽"). Bitcoin is somewhat unusual in that many people invest in Bitcoin primarily, if not solely, expecting to make money only by selling it off to somebody else later for a higher price--holding Bitcoin doesn't offer any kind of dividend like holding money in stocks, real estate, bonds, or even the miserly rate offered in a bank account. Thus, compared to other assets, you should be extremely skeptical that the actual "total capital basis" has any close relation to the market capitalization. (I personally suspect that the market capitalization is several multiples of the "total capital basis", and I suspect there's even less money sitting in the cryptocurrency ecosystem than even the "total capital basis").
• seanmcdirmid 5y ago
  The price of Bitcoin on any given day is simply the price someone is will ping to exchange dollars for it. No value appears or disappears due to a currency price swing, Bitcoin like the dollar isn’t backed by gold or corn in silos. It’s value is only what people are willing to trade for it, and that isn’t steady day by day.