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.

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.