I see many people making the assumption that the market cap is actually how much money is in the cryptocurrency ecosystem…
This is a simple example of a 95 minute period that created 16 billion dollars in ‘wealth’ from only 142 million in cash transactions.
I have my degree in applied mathematics (but degrees are worthless). I’m banned from several casinos for card counting and i am running numbers every minute of my life (i only say this so you have some idea of the type of person I am). I know there are holes in this demo that people could pick out ( see them when looking at it) but I don’t have time and resources to do a full report and to explain all the contingencies and make every part of it bulletproof. However I know mathematically that the general idea of it is true.
I am not arguing that 99.2% of the market cap is created out of thin air and fake. ( however I would argue that 90% + of the market cap is created out of thin air and fake and I would gladly take anyone on in a mathematical debate to prove it)
This graphic is created to simply teach those who are not aware a simple lesson. Market cap is not the actual amount of money in crypto.
I argue we have the same amount of money (if not more) in bitcoin right now than when we did back at $20,000 yet we are at 55% the market cap back then on BTC.
New money into the market doesn’t mean that the price will go up people.
A large majority of the crypto market is created out of thin air (Tether anyone?). It all depends on what we as a community are willing to trade bitcoin and Ethereum and a couple other currencies for in cash at that given moment. All the alts all everything else is just an extrapolation of that trade.
It is mathematically possible for 50% of the money to leave the crypto ecosystem and for the market cap to tripple. (very unlikely though). It is possible for double the money to come into the crypto ecosystem and for it to go down 50% (extremely unlikely though).
Don’t underestimate the effect of tether. You might see that its only a couple billion market cap, but trust me i’v done the math and it has a HUGE effect on the market. For all of us I hope tether stays alive (on the other hand I hope it crashes so we get it out of the way to a brighter future).
The total amount of USDT transactions is 70% of USD transactions (roughly by taking a quick look at total BTC transactions).
If we had a big sell off with 2 billion in BTC to USD transactions and DIDN’T have tether we would increase the USD transactions by 70% more. This would make the lows WAY LOWER. There is only so much cash money sitting on GDAX, Coinbase and gemini accounts. We can’t wire money in on weekends. There are ACH limits each day.
Where would the extra 1.4 billion come in to support the sell off? What happens to transaction times if all those tether transactions leave the exchanges and move to gemini coinbase etc…
A crash of tether would be detrimental downward spiral (which we would recover from).
Tether pumps the highs higher and dampens the lows so they aren’t as painful.
This post is controversial and I don’t intend to make anyone happy but that’s okay.
I am overall optimistic on crypto and blockchain’s effect on our society and bullish on several key cryptos with network effects. However I am not blinded by my optimism. I see how the wrong prick could take out a lot of the money that has been created out of thin air.
I am not blinded by my pesimism and I see how we could continue to fill this balloon larger and go to the fucking moon. Just understand that it is delicate and movements are extremely leveraged and exagerated.
Please understand I might not respond for a day or two as I am about to leave for a business trip just thought I would throw this out there before I leave.
** This isn’t FUD this is just an analysis. I thought the dollar was going to crash over 10 years ago, its still nice and strong. Shit can go on for a longggggg time.
Credit/Author: B. Johnson, Mathematician
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