you're probably not going to get a lot of crypto rants out of me, but i'll allow myself this one: i think it is bad and misleading to calculate the "value" or "worth" of a coin by multiplying its current market price by how many there are
Conversation
you might be willing to say that if you own 1 shitcoin and the market price of shitcoin is $1 then you own $1 worth of shitcoin. okay, maybe, i'll just barely let that pass. theoretically you can sell that 1 shitcoin, probably, if anyone is trading at all
1
10
say there are a million shitcoins and you own half of them and the market price of shitcoin is $1. do you own $500k of shitcoin?
the answer is that it depends on how liquid the market for shitcoins is; are there 500k people out there willing to buy a shitcoin for $1 each?
2
23
in the limit of low liquidity the concept of a "market price" breaks down; low-liquidity assets don't really have a market price. what they might have is an order book: a list of orders to buy at various prices, and a list of orders to sell at various prices
1
22
if the asset we're talking about is something like apple stock, it's fair to assume the market is very liquid, lots of buyers and sellers at similar prices (a "thick" order book), hedge funds and retail investors and whoever else. that assumption is nuts for lots of crypto
Replying to
what would probably happen if there were a million shitcoins and you owned half of them and you actually attempted to sell all of them is that you'd eat through the order book; you'd run out of people to sell to and crash the price of shitcoin
1
15
this is actually *before* the likely market effects of other people noticing that you're dumping literally half of all shitcoin; that will probably cause panic-selling and lower the price more, but that's an additional effect on top of eating through the order book
1
16
in other words, "current market price x number of coins" is a linear approximation to the actual amount of money you'd be able to get selling the coins; it becomes less accurate the more coins you have relative to the size of the order book / liquidity of the market
2
23
idk this seems like basic first principles stuff to me but i might be missing something because literally everyone talks about the "worth" or "value" of a coin this way and it drives me nuts. even ! am i missing something?
7
24
(also this is not remotely what i had in mind when i said i was going to start tweeting again but here we are)
2
21