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Bitcoin alone was apparently given a market cap of over 2 trillion recently. That’s roughly the entire GDP of France. If France’s economy poofed out of existen

Bitcoin alone was apparently given a market cap of over 2 trillion recently. That’s roughly the entire GDP of France. If France’s economy poofed out of existence or halved in value, that’d be a huge shake up.

beezle 4y ago
Slightly less than Apple's market cap.
- adamnemecek 4y ago
  GDP is annual. Market cap is not. It’s like comparing income with net worth.
  - variaga 4y ago
    It's the classic mistake of comparing stocks and flows
aaaaaaaaata 4y ago
To Belgium, perhaps.
the_gastropod 4y ago
Market cap is a hilariously meaningless term in the world of crypto. $2 Trillion very simple <number of coins> * <last purchase price> calculation. Nowhere near $2 Trillion of actual money are in this system. Comparing this to the GDP of one of the largest economies on the planet is... well, it's just silly.
mikeyouse 4y ago
It helps when you understand that "market cap" has no meaning in the crypto world and that their "trillion dollar" numbers are completely imaginary. The market cap of a stock (shares outstanding x share price) makes sense because each share represents a piece of the profits of the company and an ownership stake. If you took away half of the shares, the price per share would ~double and the market cap would remain the same since it's based on current cash + projections about the future profitability of the company, and the share price reflects those expectations. None of that is true for crypto. Financially illiterate crypto people started multiplying the coin price x number of coins outstanding and calling that a "market cap" but there's nothing underlying the crypto world. Owning a bitcoin doesn't represent a percentage profit of some underlying economic activity that's being independently valued, coins are zero coupon bearer instruments, the value is in the coin itself. It's like talking about the "market cap" of pesos, just incoherent and easily gameable.
- pavlov 4y ago
  And for a practical example of how the crypto operators weave “market cap” out of nothing, read this revealing interview with Sam Bankman-Fried: https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc58b https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc... He’s the CEO of one of the largest and most established crypto exchanges. The interview is stunning.
  - majormajor 4y ago
    How you can be in business selling this shit as non-shit when admitting the truth without having some crazy legal liability exposure problems is amazing to me. Like, FTX literally advertises "you don't need to know anything about crypto." But he says you should here!
    - pavlov 4y ago
      For a lot of people, the game seems to be simply to grab the cash now and if regulators eventually come knocking, lawyer up, settle and keep most of your profits. I remember a guy on HN a year or two ago who was very proud of the ICO he ran in 2017. The token was useless, investors lost their money, and he was fined something around a million dollars by the SEC. But to him that was a mark of pride, like he fought The Man and won. His excuse for scamming investors was basically “startups fail too, I’m a founder.” The toxic startup hustle exemplified by Uber and some other companies ten years ago directly led to the utter moral collapse in crypto.
      - majormajor 4y ago
        It's just particularly amazing when someone doesn't even follow a "keep your mouth shut until after any potential legal fallout comes" playbook. And like, if you're a crypto true-believer, any crash that may or may not happen this year probably doesn't mean too much: the surge in prices wasn't because of any particularly groundbreaking developments in terms of the main long-term pitches (e.g. "new financial infrastructure for the world"), even NFTs seemed to really follow the price run-up, not lead to it. It really looks more just like a lot of people gambling with cash to burn in a situation where a lot of traditional entertainment was less attractive if not outright restrictive. So keep your head down and keep building... But building a trading platform then talking shit about stuff that as far as I can tell you are making money off of trading (e.g. Luna, https://help.ftx.com/hc/en-us/articles/4491807784852-FTX-will-list-Terra-LUNA-Spot-Market https://help.ftx.com/hc/en-us/articles/4491807784852-FTX-wil... )... that just seems begging for trouble.
majormajor 4y ago
France's GDP results from liquid money already being moved around. "Market cap" estimates assume that everyone could sell without the price moving. It's going to be far more sensitive to price changes than an actual country's GDP, it's based on what current trading prices are. And Bitcoin, unlike a company with a huge market cap, isn't providing goods or services. E.g. if Apple disappeared into thin air, everyone hoping to buy new Apple phones or computers would be dramatically affected and that would have a ton of ripple effects. But if Apple's sales dropped to 0 and then they went out of business, their valuation would be down to 0 but a lot of people would've recouped some of their investment on the way down - the people selling earlier being better off than the ones later. This is a crazy scenario, though, since they're sales wouldn't go to 0 overnight. So who's actually relying on Bitcoin? Some companies in the space, sure. Probably a bunch of individuals who did stuff like use bitcoin as part of their wealth portfolio when taking out loans. But if those people had those holdings wiped out, will the ramifications be huge? My guess is probably not but I don't actually know how many people would, for instance, be unable to pay their mortgage if their crypto holdings imploded. (This will be interesting to see if a crash does happen: in a world where you believe prices always go up, the "clever" move is to not sell your bitcoin, but to borrow against it, so it appreciates in the background still. But in a world where there's a crash, this could leave you worse off than before, the debt won't go away just because the price fell.)
- grey-area 4y ago
  Reverse wealth effect will have a significant impact though: suddenly millions of people who thought they were well off will find out otherwise as their crypto investments melt into air at the same time as their stocks and bonds crater and central banks have few tools left to fix this as they are fighting inflation.
brendoelfrendo 4y ago
France's economy actually produces things, though; it represents the economic output of 60 million people. Bitcoin is an asset in a class of assets that doesn't really do much of anything on its own.
KrishnaShripad 4y ago
There is a big difference though. GDP is measured per year. Bitcoin market cap is of its lifetime value on date when you measured it (based on exchange rate fluctuations of course). So Bitcoin collapsing is not the same as France's economy going out of existence.
majormajor 4y ago
Consider also that Bitcoin already halved in value in recent months without having the impact of half of a France getting bombed out of existence. ;)
- jimmydorry 4y ago
  But still up at least 400-500% if you bought any time up until COVID hit. ;)
  - kgwgk 4y ago
    19,783 to 27,000 is much less than 400-500%.
    - jimmydorry 4y ago
      I think you've picked a starting point a year into COVID? ~$7500 (Dec 2019) to ~$35000 (May 2022) https://i.imgur.com/N117Uqp.png https://i.imgur.com/N117Uqp.png
      - kgwgk 4y ago
        In my timeline 2018 happened before covid hit. You can even see it on your chart. How is the late-2019 starting point relevant?
        jimmydorry 4y ago
        Because it was right before COVID occured and pretty close to the average trading price for the prevous 5 or so years. Sure, the price has run significantly higher than that average for a month or two among those 5 years... If I wanted to be pedantically accurate, I would have added a few paragraphs of disclaimers, but it was an off-hand comment pointing out the obvious that the GP had ignored in their own off-hand comment.
atleta 4y ago
The economy of France is a device that generates the GDP. Erasing that device is not the same as taking away the (one year's worth of) product of that device. If you erase the economy of France then you erase a lot of companies doing business with a substantial fraction of the world. So you shake the whole world economy not simply through erasing some money owned by someone but business connections. You'll have a lot of companies in trouble for losing either customers or important suppliers.
atdrummond 4y ago
GDP is a flow. It would be better to compare the total assets of France to Bitcoin’s market cap. France’s public stocks have a market capitalization of over $2T alone. Then there are private firms, real estate, personal and government assets, IP, etc. In short, France’s actual worth far dwarfs that of the BTC market.
- eterm 4y ago
  Right, trying to compare GDP and "market cap" is like trying to compare the Amazon river with Lake Michigan.

beezle 4y ago

Slightly less than Apple's market cap.

adamnemecek 4y ago
GDP is annual. Market cap is not. It’s like comparing income with net worth.
- variaga 4y ago
  It's the classic mistake of comparing stocks and flows

aaaaaaaaata 4y ago

To Belgium, perhaps.

the_gastropod 4y ago

Market cap is a hilariously meaningless term in the world of crypto. $2 Trillion very simple <number of coins> * <last purchase price> calculation. Nowhere near $2 Trillion of actual money are in this system. Comparing this to the GDP of one of the largest economies on the planet is... well, it's just silly.

mikeyouse 4y ago

It helps when you understand that "market cap" has no meaning in the crypto world and that their "trillion dollar" numbers are completely imaginary. The market cap of a stock (shares outstanding x share price) makes sense because each share represents a piece of the profits of the company and an ownership stake. If you took away half of the shares, the price per share would ~double and the market cap would remain the same since it's based on current cash + projections about the future profitability of the company, and the share price reflects those expectations. None of that is true for crypto. Financially illiterate crypto people started multiplying the coin price x number of coins outstanding and calling that a "market cap" but there's nothing underlying the crypto world. Owning a bitcoin doesn't represent a percentage profit of some underlying economic activity that's being independently valued, coins are zero coupon bearer instruments, the value is in the coin itself. It's like talking about the "market cap" of pesos, just incoherent and easily gameable.

pavlov 4y ago
And for a practical example of how the crypto operators weave “market cap” out of nothing, read this revealing interview with Sam Bankman-Fried: https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc58b https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc... He’s the CEO of one of the largest and most established crypto exchanges. The interview is stunning.
- majormajor 4y ago
  How you can be in business selling this shit as non-shit when admitting the truth without having some crazy legal liability exposure problems is amazing to me. Like, FTX literally advertises "you don't need to know anything about crypto." But he says you should here!
  - pavlov 4y ago
    For a lot of people, the game seems to be simply to grab the cash now and if regulators eventually come knocking, lawyer up, settle and keep most of your profits. I remember a guy on HN a year or two ago who was very proud of the ICO he ran in 2017. The token was useless, investors lost their money, and he was fined something around a million dollars by the SEC. But to him that was a mark of pride, like he fought The Man and won. His excuse for scamming investors was basically “startups fail too, I’m a founder.” The toxic startup hustle exemplified by Uber and some other companies ten years ago directly led to the utter moral collapse in crypto.
    - majormajor 4y ago
      It's just particularly amazing when someone doesn't even follow a "keep your mouth shut until after any potential legal fallout comes" playbook. And like, if you're a crypto true-believer, any crash that may or may not happen this year probably doesn't mean too much: the surge in prices wasn't because of any particularly groundbreaking developments in terms of the main long-term pitches (e.g. "new financial infrastructure for the world"), even NFTs seemed to really follow the price run-up, not lead to it. It really looks more just like a lot of people gambling with cash to burn in a situation where a lot of traditional entertainment was less attractive if not outright restrictive. So keep your head down and keep building... But building a trading platform then talking shit about stuff that as far as I can tell you are making money off of trading (e.g. Luna, https://help.ftx.com/hc/en-us/articles/4491807784852-FTX-will-list-Terra-LUNA-Spot-Market https://help.ftx.com/hc/en-us/articles/4491807784852-FTX-wil... )... that just seems begging for trouble.

majormajor 4y ago

France's GDP results from liquid money already being moved around. "Market cap" estimates assume that everyone could sell without the price moving. It's going to be far more sensitive to price changes than an actual country's GDP, it's based on what current trading prices are. And Bitcoin, unlike a company with a huge market cap, isn't providing goods or services. E.g. if Apple disappeared into thin air, everyone hoping to buy new Apple phones or computers would be dramatically affected and that would have a ton of ripple effects. But if Apple's sales dropped to 0 and then they went out of business, their valuation would be down to 0 but a lot of people would've recouped some of their investment on the way down - the people selling earlier being better off than the ones later. This is a crazy scenario, though, since they're sales wouldn't go to 0 overnight. So who's actually relying on Bitcoin? Some companies in the space, sure. Probably a bunch of individuals who did stuff like use bitcoin as part of their wealth portfolio when taking out loans. But if those people had those holdings wiped out, will the ramifications be huge? My guess is probably not but I don't actually know how many people would, for instance, be unable to pay their mortgage if their crypto holdings imploded. (This will be interesting to see if a crash does happen: in a world where you believe prices always go up, the "clever" move is to not sell your bitcoin, but to borrow against it, so it appreciates in the background still. But in a world where there's a crash, this could leave you worse off than before, the debt won't go away just because the price fell.)

grey-area 4y ago
Reverse wealth effect will have a significant impact though: suddenly millions of people who thought they were well off will find out otherwise as their crypto investments melt into air at the same time as their stocks and bonds crater and central banks have few tools left to fix this as they are fighting inflation.

brendoelfrendo 4y ago

France's economy actually produces things, though; it represents the economic output of 60 million people. Bitcoin is an asset in a class of assets that doesn't really do much of anything on its own.

KrishnaShripad 4y ago

There is a big difference though. GDP is measured per year. Bitcoin market cap is of its lifetime value on date when you measured it (based on exchange rate fluctuations of course). So Bitcoin collapsing is not the same as France's economy going out of existence.

majormajor 4y ago

Consider also that Bitcoin already halved in value in recent months without having the impact of half of a France getting bombed out of existence. ;)

jimmydorry 4y ago
But still up at least 400-500% if you bought any time up until COVID hit. ;)
- kgwgk 4y ago
  19,783 to 27,000 is much less than 400-500%.
  - jimmydorry 4y ago
    I think you've picked a starting point a year into COVID? ~$7500 (Dec 2019) to ~$35000 (May 2022) https://i.imgur.com/N117Uqp.png https://i.imgur.com/N117Uqp.png
    - kgwgk 4y ago
      In my timeline 2018 happened before covid hit. You can even see it on your chart. How is the late-2019 starting point relevant?
      - jimmydorry 4y ago
        Because it was right before COVID occured and pretty close to the average trading price for the prevous 5 or so years. Sure, the price has run significantly higher than that average for a month or two among those 5 years... If I wanted to be pedantically accurate, I would have added a few paragraphs of disclaimers, but it was an off-hand comment pointing out the obvious that the GP had ignored in their own off-hand comment.

atleta 4y ago

The economy of France is a device that generates the GDP. Erasing that device is not the same as taking away the (one year's worth of) product of that device. If you erase the economy of France then you erase a lot of companies doing business with a substantial fraction of the world. So you shake the whole world economy not simply through erasing some money owned by someone but business connections. You'll have a lot of companies in trouble for losing either customers or important suppliers.

atdrummond 4y ago

GDP is a flow. It would be better to compare the total assets of France to Bitcoin’s market cap. France’s public stocks have a market capitalization of over $2T alone. Then there are private firms, real estate, personal and government assets, IP, etc. In short, France’s actual worth far dwarfs that of the BTC market.

eterm 4y ago
Right, trying to compare GDP and "market cap" is like trying to compare the Amazon river with Lake Michigan.