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> I'm not sure where the author gets this from, but it doesn't make sense. It makes sense if you look at bitcoin like a speculative asset with a cash value, wh

> I'm not sure where the author gets this from, but it doesn't make sense. It makes sense if you look at bitcoin like a speculative asset with a cash value, which is how most people who own bitcoin treat it. Bitcoin has a market cap based on its current exchange value, which is the "pot of money". As more people buy bitcoin, it's cash value goes up, and vice versa. One can argue whether this adheres to the purist view of Nakamoto et al but this is simply how crypto is marketed to consumers, for better or worse. And in this system, the ways in which these various exchanges and defi platforms facilitate access to blockchain technology through cash transactions ultimately define its value, as we've seen these tokens plummet this year. > Again, bitcoin transactions merely unlock and re-lock value as an atomic operation. What the author characterizes as "value" is an off-chain phenomenon. People only care about bitcoin nowadays precisely because of what happens "off-chain". If 1 bitcoin was still a penny, nobody outside the crypto enthusiasts would care more than a decade into this experiment.

cma 4y ago
> As more people buy bitcoin, it's cash value goes up, and vice versa. Ignoring mining, every purchase is a sale, and vice versa. Lots of new people could buy bitcoin and its price could drop in the process. What you maybe mean is something else about supply and demand?
panarky 4y ago
> its current exchange value, which is the "pot of money" It's not a "pot of money" because the market cap is not determined by the amount of government currency traded for bitcoin. Trading $100,000,000 for 5,000 bitcoin does not increase the market cap by $100,000,000. Similarly, trading 5,000 bitcoin for $100,000,000 does not decrease the market cap by $100,000,000. Since there's a seller for every buyer, there's zero money going into any "pot". The market cap is determined by what price buyers and sellers agree on at any point in time. That means the market cap can double, or halve, instantly, even though trading volume is a tiny fraction of the change in market cap. There is no pot. And it works the same way for every other market, from stocks to bonds to gold and real estate.
- nly 4y ago
  Nevertheless we humans still think of things in terms of pots. The term "pension pot" comes to mind. The reality is the market value of anything is influenced a great deal by human sentiment, as well as raw intrinsic properties of an underlying asset or the performance of a business. Investors like to think they are actually "investing" in Google when they buy Alphabet shares even though not a single penny of their money is going to Google for the board to direct toward productive endeavours. Even earned income in a savings account is an act of faith... in a system that we hope will continue to value an hour of our labour today to something close to what it will be a year from now. The savings account itself isn't a store of value, it's the nature of the labour market here that is actually the store of value.
  - lexapro 4y ago
    In the end everything is based on faith. You hope that in the future your stocks/bonds/cash/gold/crypto/bank account/real estate a) are still recognized as being yours and that b) some entity will be willing and able to exchange it for something of the same or higher value as you think it has now
  - panarky 4y ago
    The author states this myth perfectly: Every cryptocurrency is its own pot of money. When people sell, they are taking money out of the pot. When people buy, they are putting money into the pot. It's a popular myth but it's obviously bogus when you realize that for every buyer there is a seller. So when people buy a gold bar, or 100 shares of AAPL or a cabin at the lake, the money the buyer puts in is exactly offset by the money the seller takes out.
- thr0wawayf00 4y ago
  I'm not trying to argue that the "pot" is an actual pot of money, it's obviously a metaphor.
sph 4y ago
> Bitcoin has a market cap based on its current exchange value, which is the "pot of money". As more people buy bitcoin, it's cash value goes up, and vice versa. This is not how trading and market cap works, at all. There is no "pot of money" either.

cma 4y ago

> As more people buy bitcoin, it's cash value goes up, and vice versa. Ignoring mining, every purchase is a sale, and vice versa. Lots of new people could buy bitcoin and its price could drop in the process. What you maybe mean is something else about supply and demand?

panarky 4y ago

> its current exchange value, which is the "pot of money" It's not a "pot of money" because the market cap is not determined by the amount of government currency traded for bitcoin. Trading $100,000,000 for 5,000 bitcoin does not increase the market cap by $100,000,000. Similarly, trading 5,000 bitcoin for $100,000,000 does not decrease the market cap by $100,000,000. Since there's a seller for every buyer, there's zero money going into any "pot". The market cap is determined by what price buyers and sellers agree on at any point in time. That means the market cap can double, or halve, instantly, even though trading volume is a tiny fraction of the change in market cap. There is no pot. And it works the same way for every other market, from stocks to bonds to gold and real estate.

nly 4y ago
Nevertheless we humans still think of things in terms of pots. The term "pension pot" comes to mind. The reality is the market value of anything is influenced a great deal by human sentiment, as well as raw intrinsic properties of an underlying asset or the performance of a business. Investors like to think they are actually "investing" in Google when they buy Alphabet shares even though not a single penny of their money is going to Google for the board to direct toward productive endeavours. Even earned income in a savings account is an act of faith... in a system that we hope will continue to value an hour of our labour today to something close to what it will be a year from now. The savings account itself isn't a store of value, it's the nature of the labour market here that is actually the store of value.
- lexapro 4y ago
  In the end everything is based on faith. You hope that in the future your stocks/bonds/cash/gold/crypto/bank account/real estate a) are still recognized as being yours and that b) some entity will be willing and able to exchange it for something of the same or higher value as you think it has now
- panarky 4y ago
  The author states this myth perfectly: Every cryptocurrency is its own pot of money. When people sell, they are taking money out of the pot. When people buy, they are putting money into the pot. It's a popular myth but it's obviously bogus when you realize that for every buyer there is a seller. So when people buy a gold bar, or 100 shares of AAPL or a cabin at the lake, the money the buyer puts in is exactly offset by the money the seller takes out.
thr0wawayf00 4y ago
I'm not trying to argue that the "pot" is an actual pot of money, it's obviously a metaphor.

sph 4y ago

> Bitcoin has a market cap based on its current exchange value, which is the "pot of money". As more people buy bitcoin, it's cash value goes up, and vice versa. This is not how trading and market cap works, at all. There is no "pot of money" either.