If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

Right, but that's essentially a lazy re-definition of the term. I get that it's a bit wordy to always say, "the current total value of all bitcoins is $X billion", but market cap is specifically about the total value of a security's outstanding shares. If people want bitcoin to be treated seriously as a currency, they should stop using terms that explicitly refer to non-currencies.

To put it another way, no one would reasonably talk about something like the "market cap of the Euro"[0], so why would you do that for something else claimed to be a currency?

[0] Entertainingly, when I search "euro currency market cap", most of the results that come up are related to cryptocurrency.

Market cap is an equities concept. The market value of a series of bonds isn't the issuance's market cap. The notional value of all options on a symbol is only useful to operations/settlement folk.

For Bitcoin, "market cap" is meaningless. It's too thinly and opaquely traded. Better would be flow of funds, i.e. value of new money flowing into and out of the system.

Put another way, if you bought all the shares in a company, you'd have the company. If you bought all the bonds of a company, you'd own the debt. The aggregates have meaning. If you bought every Bitcoin in existence (or dollar, for that matter), you would have nothing.

Yes it is...

> The market cap for any security, by definition, is price-per-security number-of-securities.*

How do you think you get the price-per-security for a stock? If Apple has $100B in cash, why is their Market Cap $1.2T?

This is why people are skeptical of most things crypto... it really seems like there's hardly anyone in the community who understand fundamental financial concepts.

> You can argue that asset prices should be derived from future cash flows, and hence, both Bitcoin and gold should be almost worthless.

No - I'd just argue that it's completely misleading to try and assign a "market cap" to any asset other than a security and that people who rely on them are doing so to mislead rather to inform.

Which points to what IMO underpins whatever Bitcoin's underlying value is: a fear - or for some a hope - that typical vehicles investments will have precipitously declining future cash flow.

In that way it's like gold (minus the part about being pretty and useful for selling overpriced audio cables - is that still a thing?).

Unlike gold, though, it's in a way harder to secure, either by individuals or governments, because it isn't held behind physical security measures. Rather it's subject to the same large scale attacks as any other information on the Internet.

Not really: spot and outright forwards are about $3tn of daily turnover in the OTC forex markets; with forex swaps amounting to about another $3.2tn.

There is about $100tn notional of OTC forex derivatives outstanding, but the actual total market value is only about $2.2tn. Exchange-traded forex futures and options have barely $170bn of daily average turnover of notional.

(all numbers courtesy of the Bank for International Settlements)

But it's great as a store of value, censorship-resistant money, and one of the fastest and cheapest ways to do cross-border remittances.

I'd say they all have every single incentive to wash-trade, front-run, and otherwise cheat the hell out of their system to their advantage. After all, they are completely unregulated and almost always operate well outside any jurisdiction who would care to go after them. I'd say you'd be silly to assume they aren't doing ultra-shady crap.

https://cryptopotato.com/95-of-bitcoin-trading-volume-is-fak...

>Wrong. Good argument

Say a 100 people each own a 100 gold pieces. And they all buy and sell 100 gold pieces worth of goods and services per day.(10,000 gold pieces are traded) Why would it matter if this is physically the same gold coin traded 10,000 times or 10,000 gold coins being traded once?

Because there aren't physical Bitcoins.

I think Bitcoin is similar to the gold standard, and its popularity lies in the mismatch of goals between government desires for fiat issuance and individuals for storing value.

- Crypto enthusiasts who are infatuated with the technology or the math involved

- Anti-Fed Libertarian types who want to use something that isn't controlled by a government

- HFTs and speculators who either use it in part of their models or as a pump and dump vehicle

Some people also use it to buy illegal stuff, but most of them have moved onto Monero as the primary privacy-based cryptocurrency.

I don't think they abandoned the idea of it being a currency, I think they just have different ideas about how exactly to go about scaling it. The block size limit (and therefore the transactions per second limit) was raised 2x rather than significantly more because they don't think scaling onchain is a viable long term solution [0].

Lightning, and other second layer networks have always been discussed as the solution to this scaling problem, and while they are still very early, there's already a fair amount of usage. I work at a company that accepts Bitcoin, and as of today, > 90% of our transaction volume is via lightning.

[0] https://en.bitcoin.it/wiki/Block_size_limit_controversy#Argu...

Fees may have made this inevitable, but having to deal with taxes has definitely made me much more wary of using it for small purchases. Bitcoin tax accounting is tedious, and I think once a company solves non-custodial record keeping for the purposes of automated tax accounting, it will increase velocity of spending.

Since lightning requires Bitcoin to settle transactions between parties, it means that the more users there are making transactions, the more it needs bitcoin.

If it's just a handful of users making a million transactions, then there's no problem since lightning will do the math and then settle on Bitcoin with a handful of transactions. If there's a million users making a handful of transactions, well, then lightning needs to settle a few million transactions on Bitcoin (which takes weeks).

Is the rest of the sentence that you quoted out of context. Did you not see the example?