Crypto::Creating Wealth or Looking for the Bigger Fool
Total Crypto Market Cap is now $2.4 trillion!!! Bitcoin commands around $1 trillion of this total. Impressive for a sector that seemingly started at zero. During this journey from zero to a couple trillion, no actual wealth was created. It just changed hands (transferred) to the person willing to pay the highest price.
Take for example, Shiba Inu. This week, Shiba Inu went from a market cap of 13 billion to 20 billion only to go back to 13. During this time, only 3 billion worth of Shiba Inu was transacted. how does that make sense??? Market cap only looks at the current value, or the last price transacted. So market cap can fluctuate by billions like in this situation by a "share/coin" being transacted at a higher value. In order for Shiba Inu investors to realize their gains of 13 billion market cap, is to find other investors willing to pay a value of 13 billion market cap.
The difference with stocks is that, the investor does not need to sell inorder the value in his shares. They can hold their share and collect dividends. Companies use the money from investors to create wealth for their investors. ex. Apple uses your money to develop their new product and the profit leads to higher cashflows allowing you to collect a bigger dividend or sell your share for higher price - in the process - creating wealth. A company that does not provide dividends still has a plan to create more money and increase the companies cashflow. In crypto, every time an "investor" realizes a gain for themselves someone else needs to put their chips on the table. This works unless you are one of the biggest fools holding the bag.
Thoughts?
Take for example, Shiba Inu. This week, Shiba Inu went from a market cap of 13 billion to 20 billion only to go back to 13. During this time, only 3 billion worth of Shiba Inu was transacted. how does that make sense??? Market cap only looks at the current value, or the last price transacted. So market cap can fluctuate by billions like in this situation by a "share/coin" being transacted at a higher value. In order for Shiba Inu investors to realize their gains of 13 billion market cap, is to find other investors willing to pay a value of 13 billion market cap.
The difference with stocks is that, the investor does not need to sell inorder the value in his shares. They can hold their share and collect dividends. Companies use the money from investors to create wealth for their investors. ex. Apple uses your money to develop their new product and the profit leads to higher cashflows allowing you to collect a bigger dividend or sell your share for higher price - in the process - creating wealth. A company that does not provide dividends still has a plan to create more money and increase the companies cashflow. In crypto, every time an "investor" realizes a gain for themselves someone else needs to put their chips on the table. This works unless you are one of the biggest fools holding the bag.
Thoughts?
Comment:
3.1*inorder to realize the value in their shares