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No, the wealth actually is gone. For example, bitcoin has a market cap of $320B. At its peak it was worth about four times that. Did $960B just disappear? Basi

No, the wealth actually is gone. For example, bitcoin has a market cap of $320B. At its peak it was worth about four times that. Did $960B just disappear? Basically, yes. The coin has no intrinsic value (in the way that a can of corn does, for example). It's worth money because people say it is. And market cap is just a multiple of what it trades for at the margins times the number of shares (coins). To give an example, say that I bought a bitcoin 10 years ago and that it was my only possession. At its peak, I could have sold the bitcoin for ~$64k, so I had a net worth of 64k. If I didn't sell it at that point and still hold it, I'm now worth ~16k. No one made $48K of of me... there were no transactions in that time period. The "wealth" has simply vanished.

johnvanommen 4y ago
Agree 100% What's happening is not great for crypto investors, but it's beneficial for people who want inflation to go down (nearly all of us.)
- IanDrake 4y ago
ddbb33 4y ago
> I had a net worth of 64k No you didn’t. You had a potential net worth of 64k, but you didn’t take advantage. You can’t just compare to peak, your wealth loss/gain comes from comparing to the price you bought it.
- 0xCMP 4y ago
  How else would you understand wealth? Are people who have loans against massive stock portfolios but relatively little cash (spent on houses, cars, trips, etc)... poor? Obviously not. OP was worth at least 64k at some point and now is worth at least 16k. The value and total amount of wealth (in US Dollars) has gone down.
- wongarsu 4y ago
  What's a potential net worth? "Net worth" is already "how much money would you have if you sold all your assets and settled all your debts". Since for most people most of their wealth is in assets, it's totally normal for net worth to swing up and down as the market value of household goods/land/buildings/companies/bitcoins changes.
  - jakelazaroff 4y ago
    The catch is that even if your net worth is a certain amount on paper, you can't necessarily realize that as cash. Take Elon Musk, for example. A lot of his wealth is in Tesla stock. But he can't sell that stock without also affecting its price. If he decided to sell all of it tomorrow, the price would plummet and he would only receive a fraction of what it's worth today. This is what a lot of these companies are doing. I can create 100 tokens and sell you one for $1. In theory, my "net worth" is now $99, since I have 99 tokens that are worth $1 each. In reality, if I tried to sell all 99 of them, I'd quickly find that people are actually not willing to buy all of them for that amount.
zapdrive 4y ago
> The coin has no intrinsic value This is pretty debatable. Bitcoin does have some intrinsic value as a medium of exchange and store of value.
- blowski 4y ago
  What can you do with the bits that make up your Bitcoin, other than trade them for something else?
  - vntok 4y ago
    You can prove you actually own how much you want to prove you actually own, without leaking any other information on your identity or current wealth. You can sign documents. You can mount complex escrow processes with it. You can send it worldwide to anybody without even knowing where they live (phone numbers fail), or what their bank is (IBANs fail) or what their email is (gift cards fail) or whether they are allowed by someone else to receive money (paypal fails). You can pool it with friends and set up conditions for safe withdrawal reliant on multiple people agreeing at the same time. And you can receive money from anyone, anywhere around the world, without anyone else's permission.
    - blowski 4y ago
      Só if you send it to someone, what can they do with it?
    - jboy55 4y ago
      Yes, but how many coins fulfill those basic requirements? Why is btc special? Why would any of these coins be worth anything besides some fee to convert-to from fiat and convert-from to fiat?
  - none_to_remain 4y ago
    You can pay Bitcoin (and only Bitcoin) to embed messages, typically transaction messages, in the global Bitcoin blockchain. I was hoping years back that all of this would have taken off for payments rather than silliness. I was wondering if we'd see a (low) Bitcoin value determined by the need to pay BTC transaction fees and those fees being effectively locked up until the next block comes
Aperocky 4y ago
He was talking about money and you wealth. I trust money more than wealth. Unsold stock should not be quantified until the moment it is sold. It's getting tiring to hear about "so and so billionaire lost X billion". No, they didn't lose anything that they didn't have to begin with. Having more stock than the trade volume of that stock means all of that "wealth" is mostly theoretical.
- monkmartinez 4y ago
  I totally agree... crazy times in the past few years. I have heard that some people were able to borrow against their "wealth" (stock holdings, crypto holdings, vested ownership shares) for homes, cars, boats and more since Covid. If their "wealth" suddenly evaporates in the form of losses, they find themselves on the wrong side of the trade. Super duper risky and the appetite for these "products" was immense from what I understand.
- twblalock 4y ago
  If you didn't count the "theoretical" wealth you wouldn't call them billionaires in the first place. That "theoretical" wealth clearly has a massive impact on the real world, so it's silly to pretend it does not exist. For example, Elon didn't buy Twitter with a giant bag of gold coins -- he borrowed against his wealth, which is mostly in stock.
  - Aperocky 4y ago
    And his "wealth" shrunk far more than what he had to liquidate and pay twitter for. Because no sane organization will lend out real cash over the same amount of collateral TSLA stock, and leveraged lending opens TSLA to extremely high risk as value dropping would means Musk will be forced to sell to cover/and or stake more TSLA. This is exactly how FTX failed - they counted their own token as their "asset". Spoiler: it didn't work. Does this wealth have a high impact on the world? Of course it does. But does it has the same impact as same volume of cash? Absolutely not.
  - three_seagrass 4y ago
    Also Zuck lost $100,000,000,000 in wealth when Facebook tanked. Counting beans in hand is not how wealth is calculated.
ericd 4y ago
Let's take a different example. Let's say I have 100 foobar coins. I sell one of them to an associated entity for $1, the market cap is now $100, I have $99 in "wealth". That entity sells one back to me for $2, now the market cap is $200. I sell it back for $3, now the market cap is $300. Do I now actually have $300 in wealth? No, because it's illiquid, and the bid for it more broadly is likely $0, I have to apply a large liquidity discount. It seems like many communities behind these coins have been doing something similar to the internal trading I've been describing here, and hyping them to find outside people willing to trade some of their real dollars for these worthless coins, and those few trades have been used to establish the broader market caps of these things. All illiquid and somewhat illiquid have this property to varying degrees, ranging from startup stock (no, selling 20% for $1M to a VC doesn't mean your company is actually worth $5M, unless you could find a buyer for all the stock for that much) all the way up to Amazon, Tesla, Apple, etc, because there's no buyer waiting to absorb all the outstanding stock at the current bid. There would be a buyer willing to absorb all of it at some level, but it's likely at a level far lower than the current market cap.
- jboy55 4y ago
  Twitter is a counter example for your tech stock scenario. However, you could argue that its hyper-inflated Tesla stock trading for hyper-inflated Twitter stock, much like a BTC millionare, trading BTC for ETH.
  - ericd 4y ago
    Right, if a company finds a buyer, then its market cap is suddenly realized. The liquidity discount is meant to reflect the uncertainty of that given no current bidder for all the stock, and the discount is lower for public companies with demonstrated interest than for private companies. And you can see the downward pressure that Musk’s selling Tesla shares has had on its price.
- root_axis 4y ago
  Indeed. It's no different than if I kept a hand written ledger in a paper notebook and sold entries onto that ledger for USD. In this case, people would see its a piece of paper and scoff at the idea that having their name written onto this paper is worth any money, even if someone else paid money to put their name on the ledger, but doing the exact same thing with cryptocurrencies fools people because the fake spot price and fake market cap is broadcast across the internet as if it were real, obscuring the fact that each of these coins is just the digital version of someone's personal notebook.
bluecalm 4y ago
The "market cap" for crypto is just an illusion. There never was enough liquidity. The money was lost the moment you exchanged it to crypto. Some of it is in hands of other people. Some of it was spent to keep the show going (mining, employees for all the crypto businesses etc.). You and every individual investor could have cashed out but that is as saying that Madoff customers could have cashed out. It's just an illusion. Most of the money disappeared once you deposited and Madoff, SBF, or some other scammer spent it on a new boat or house on an island.

johnvanommen 4y ago

Agree 100% What's happening is not great for crypto investors, but it's beneficial for people who want inflation to go down (nearly all of us.)

IanDrake 4y ago

ddbb33 4y ago

> I had a net worth of 64k No you didn’t. You had a potential net worth of 64k, but you didn’t take advantage. You can’t just compare to peak, your wealth loss/gain comes from comparing to the price you bought it.

0xCMP 4y ago
How else would you understand wealth? Are people who have loans against massive stock portfolios but relatively little cash (spent on houses, cars, trips, etc)... poor? Obviously not. OP was worth at least 64k at some point and now is worth at least 16k. The value and total amount of wealth (in US Dollars) has gone down.
wongarsu 4y ago
What's a potential net worth? "Net worth" is already "how much money would you have if you sold all your assets and settled all your debts". Since for most people most of their wealth is in assets, it's totally normal for net worth to swing up and down as the market value of household goods/land/buildings/companies/bitcoins changes.
- jakelazaroff 4y ago
  The catch is that even if your net worth is a certain amount on paper, you can't necessarily realize that as cash. Take Elon Musk, for example. A lot of his wealth is in Tesla stock. But he can't sell that stock without also affecting its price. If he decided to sell all of it tomorrow, the price would plummet and he would only receive a fraction of what it's worth today. This is what a lot of these companies are doing. I can create 100 tokens and sell you one for $1. In theory, my "net worth" is now $99, since I have 99 tokens that are worth $1 each. In reality, if I tried to sell all 99 of them, I'd quickly find that people are actually not willing to buy all of them for that amount.

zapdrive 4y ago

> The coin has no intrinsic value This is pretty debatable. Bitcoin does have some intrinsic value as a medium of exchange and store of value.

blowski 4y ago
What can you do with the bits that make up your Bitcoin, other than trade them for something else?
- vntok 4y ago
  You can prove you actually own how much you want to prove you actually own, without leaking any other information on your identity or current wealth. You can sign documents. You can mount complex escrow processes with it. You can send it worldwide to anybody without even knowing where they live (phone numbers fail), or what their bank is (IBANs fail) or what their email is (gift cards fail) or whether they are allowed by someone else to receive money (paypal fails). You can pool it with friends and set up conditions for safe withdrawal reliant on multiple people agreeing at the same time. And you can receive money from anyone, anywhere around the world, without anyone else's permission.
  - blowski 4y ago
    Só if you send it to someone, what can they do with it?
  - jboy55 4y ago
    Yes, but how many coins fulfill those basic requirements? Why is btc special? Why would any of these coins be worth anything besides some fee to convert-to from fiat and convert-from to fiat?
- none_to_remain 4y ago
  You can pay Bitcoin (and only Bitcoin) to embed messages, typically transaction messages, in the global Bitcoin blockchain. I was hoping years back that all of this would have taken off for payments rather than silliness. I was wondering if we'd see a (low) Bitcoin value determined by the need to pay BTC transaction fees and those fees being effectively locked up until the next block comes

Aperocky 4y ago

He was talking about money and you wealth. I trust money more than wealth. Unsold stock should not be quantified until the moment it is sold. It's getting tiring to hear about "so and so billionaire lost X billion". No, they didn't lose anything that they didn't have to begin with. Having more stock than the trade volume of that stock means all of that "wealth" is mostly theoretical.

monkmartinez 4y ago
I totally agree... crazy times in the past few years. I have heard that some people were able to borrow against their "wealth" (stock holdings, crypto holdings, vested ownership shares) for homes, cars, boats and more since Covid. If their "wealth" suddenly evaporates in the form of losses, they find themselves on the wrong side of the trade. Super duper risky and the appetite for these "products" was immense from what I understand.
twblalock 4y ago
If you didn't count the "theoretical" wealth you wouldn't call them billionaires in the first place. That "theoretical" wealth clearly has a massive impact on the real world, so it's silly to pretend it does not exist. For example, Elon didn't buy Twitter with a giant bag of gold coins -- he borrowed against his wealth, which is mostly in stock.
- Aperocky 4y ago
  And his "wealth" shrunk far more than what he had to liquidate and pay twitter for. Because no sane organization will lend out real cash over the same amount of collateral TSLA stock, and leveraged lending opens TSLA to extremely high risk as value dropping would means Musk will be forced to sell to cover/and or stake more TSLA. This is exactly how FTX failed - they counted their own token as their "asset". Spoiler: it didn't work. Does this wealth have a high impact on the world? Of course it does. But does it has the same impact as same volume of cash? Absolutely not.
- three_seagrass 4y ago
  Also Zuck lost $100,000,000,000 in wealth when Facebook tanked. Counting beans in hand is not how wealth is calculated.

ericd 4y ago

Let's take a different example. Let's say I have 100 foobar coins. I sell one of them to an associated entity for $1, the market cap is now $100, I have $99 in "wealth". That entity sells one back to me for $2, now the market cap is $200. I sell it back for $3, now the market cap is $300. Do I now actually have $300 in wealth? No, because it's illiquid, and the bid for it more broadly is likely $0, I have to apply a large liquidity discount. It seems like many communities behind these coins have been doing something similar to the internal trading I've been describing here, and hyping them to find outside people willing to trade some of their real dollars for these worthless coins, and those few trades have been used to establish the broader market caps of these things. All illiquid and somewhat illiquid have this property to varying degrees, ranging from startup stock (no, selling 20% for $1M to a VC doesn't mean your company is actually worth $5M, unless you could find a buyer for all the stock for that much) all the way up to Amazon, Tesla, Apple, etc, because there's no buyer waiting to absorb all the outstanding stock at the current bid. There would be a buyer willing to absorb all of it at some level, but it's likely at a level far lower than the current market cap.

jboy55 4y ago
Twitter is a counter example for your tech stock scenario. However, you could argue that its hyper-inflated Tesla stock trading for hyper-inflated Twitter stock, much like a BTC millionare, trading BTC for ETH.
- ericd 4y ago
  Right, if a company finds a buyer, then its market cap is suddenly realized. The liquidity discount is meant to reflect the uncertainty of that given no current bidder for all the stock, and the discount is lower for public companies with demonstrated interest than for private companies. And you can see the downward pressure that Musk’s selling Tesla shares has had on its price.
root_axis 4y ago
Indeed. It's no different than if I kept a hand written ledger in a paper notebook and sold entries onto that ledger for USD. In this case, people would see its a piece of paper and scoff at the idea that having their name written onto this paper is worth any money, even if someone else paid money to put their name on the ledger, but doing the exact same thing with cryptocurrencies fools people because the fake spot price and fake market cap is broadcast across the internet as if it were real, obscuring the fact that each of these coins is just the digital version of someone's personal notebook.

bluecalm 4y ago

The "market cap" for crypto is just an illusion. There never was enough liquidity. The money was lost the moment you exchanged it to crypto. Some of it is in hands of other people. Some of it was spent to keep the show going (mining, employees for all the crypto businesses etc.). You and every individual investor could have cashed out but that is as saying that Madoff customers could have cashed out. It's just an illusion. Most of the money disappeared once you deposited and Madoff, SBF, or some other scammer spent it on a new boat or house on an island.