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Comment by cageface | Hacker News Reader

hitting $1 trillion in market capitalization in February 2021

Multiplying the price of 1 BTC by the number of BTC to get a "market cap" is pretty wishful thinking. Significant selling would tank the price.

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Multiplying the price of 1 share by the number of shares to get a "market cap" is pretty wishful thinking. Significant selling would tank the price.

"Market capitalization refers to the total dollar market value of a company's outstanding shares of stock. Commonly referred to as "market cap," it is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share. "

Sure the definition mentions shares, but the concept can theoretically be applied to anything.

Ain't that true for any currency and stock?

The definition of Market Capitalization is "Commonly referred to as "market cap," it is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share." according to investopedia.[1]

[1] https://www.investopedia.com/terms/m/marketcapitalization.as...

The price has skyrockted but transaction volume is not keeping pace. This is not what you'd expect if the market cap is anything close to meaningful and unlike heavily traded securities:

https://ycharts.com/indicators/bitcoin_transactions_per_day

It's exactly what you'd expect for a price increase driven from the supply side, which is kind of expected for a commodity like BTC whose attraction is largely the expectation of price appreciation because of supply restriction.

That's how market cap is defined, and that criticism that selling would tank it applies to everything...

> Significant selling would tank the price.

And significant buying would raise the price. “Market cap” is a weird thing which requires assuming symmetric expansion of supply and demand. It's the least-bad general-purpose valuation metric, but it's not really good for any specific purpose, and it's specifically farther from any kind of meaningful reality the lower the ratio of actual units traded to total available units is in any given interval of time.

That is to say, BTC’s market cap is mostly meaningless, but that's really a difference only of degree and not kind with market caps generally.

Isn't that how you calculate a company's market cap?

That will also tank with significant selling.

A bigger issue to me, would be we don't know how much BTC is lost due to wallets being inaccessible.

But that's how market cap is calculated. It doesn't mean BTC has that value.

It also doesn’t account for all the locked btc due to theft, fraud or just the owner losing the key. I’d put it at half that, most btc never moves.

What calculation do you propose? And which asset doesn't behave in this way?

True for all securities.

It is not "wishful thinking", it is misleading because approximately more than half of all Bitcoins are lost for ever or tainted. Especially early Bitcoins mined by Satoshi himself should be considered inactive permanently. Additionally liquidity for Bitcoin is even worse than that of other assets/currencies because it is a store of value which means people buy it and don't spend or sell it. If Bitcoin wants to be suitable as a world trade currency the price has to rise at least 4 orders of magnitude to be able supply the required amount of liquidity.

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