"Market cap" is borrowed from equity - the market cap of Apple for instance is determined by the number of shares of Apple outstanding x their price. But those shares have intrinsic value in that they grant you rights to a proportional amount of Apple's cash flow. If you were to destroy 50% of Apple's shares, the remaining half would be worth twice as much since the present value of Apple's cash flows hasn't changed.

Assets and currencies don't have market caps in any sense. Take a look back pre-Bitcoin and there are basically no references to the "market cap of Gold" or any such thing, they've all arisen due to the comparisons to Bitcoin. There's no intrinsic or underlying value, prices are purely trade driven. This doesn't make them "bad" per se, just completely different than something like Market Cap can capture.

As one other point for Bitcoin specifically, basically nobody knows how many Bitcoin are actually in circulation. There are a million+ lost / inactive. If someone moved a single BTC out of Satoshi's wallet, the price would very likely collapse nearly instantaneously. So how can a "market cap" be treated seriously if a single "share" trading hands at current market prices would collapse it. Bezos sells over $1 Billion of Amazon stock per year to no impact on AMZN.

There are 4.6 bitcoin transactions per second, how many dollar transaction do you think there are per second and what kind of volume of dollars are traded. Also there are different kinds of dollar in circulation, for example M2 is much higher (by a factor of 10) https://fred.stlouisfed.org/series/M2SL.

A better question to ask is 'why it has meaning'.

Money supply has meaning because it's money in circulation.

If I print 1000 'Buddy Dollars' and sell one to a friend for $1000, it doesn't really mean that I have $1M in Buddy Dollars.

It might be helpful to compare the amount of USD spent on goods and services vs. the amount of Crypto spent on goods and services.

Because the value of cryptocurrency is strongly effected by the volume of buy and sell pressure. Market cap implies that a level of liquidity which is likely not present -- it can very difficult to sell large amounts of most crypto without at least temporarily tanking the value.