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Comment by auiya | Hacker News Reader

Cryptocurrency is just penny stocks (before regulation). Same pump-and-dump manipulation occurs. Why is this surprising?

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What about the flash crash of stock market by a single individual? https://en.m.wikipedia.org/wiki/2010_Flash_Crash

Your source says that the cause of the flash crash is unknown and not shown to be caused by a single individual.

Thanks for pointing that out. I missed that part. Anyway in one report it says that "high-frequency traders did not cause the Flash Crash, but contributed to it by demanding immediacy ahead of other market participants."

Bitcoin would be the ~20th largest company in the S&P by market cap. Hardly a penny stock.

Given the volatility, few if any actual uses, the fraudulent exchanges, crackdown by the SEC, value based entirely on speculation, and not producing anything useful, you're right.

It is way worse than penny stocks, and it is unfair to penny stocks to compare them to crypto currencies.

Bitcoin's "market cap" is completely imaginary.

There are companies offering completely useless software 'solutions' that don't even do their useless task well and many of them have stock prices that have grown 100% + since the bailouts, even if they haven't updated their technology since before then. How is the value of BTC more fake than that?

The difference is that if management of the average publicly traded stock shopped it around, they could probably find a buyer for 50% or more of current market cap. Maybe not for the biggest companies like Amazon and Apple. If a substantial fraction of BTC owners tried to exit, they'd have more trouble getting close to nominal value.

For something like this a metric known as enterprise value is used. Assets - cash + debt AKA the takeover price. You can find these numbers on the company's balance sheet. The average company is traded at something like 3.5x their book value (Assets - debt). The market value of a company is likewise some multiple of their EV.

That is understating the situation quite a bit. Volume is so non-existent that basically any attempt at exiting at all would crater the price.

Market cap is an absurd metric for cryptocurrencies. If print a billion tokens and sell you one for a dollar, it’s a billion dollar market cap.

so are stocks

Stocks are, generally, asset backed and revenue generating.

the market cap isn't asset backed. it reflects potential future revenue

there is an old adage I recall in trading.. "volume justifies price". so if you can sell your shiny new coin for a dollar a token with a billion such tokens outstanding & you can do it with any significant volume then yeah it would be a billion dollar cap coin.

Nice strawman though!

Unlike penny stocks, bitcoin won't perform a 100:1 reverse-split and print new coins. Many penny stock gamblers have been burned this way, which is why they're moving into crypto

No, instead Bitcoin forks: https://www.forks.net/list/Bitcoin/

Which doesn't in any way alter the supply of Bitcoin.

It's like saying I would dilute the value of the US dollar by printing billions of my own "fork dollar".

Each time it forks it creates the same supply of bitcoins virtually indistinguishable by anything other than name and mining nodes.

Sure, the limit of Bitcoin Core is still set at 21M, but that limit is quite arbitrary and in time maybe more malleable than people currently believe.

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