Post
Topic
Board Bitcoin Discussion
Re: Bitcoins have lost $210,000,000 USD since June 9th 2011
by
Steve
on 27/09/2011, 19:50:17 UTC
Do you honestly think that if you had $250 million that you could buy 7 million bitcoins today?  I doubt it.

Market cap is a meaningless figure when it comes to bitcoin or any other currency.  Bitcoin is not a stock (where market cap would indicate the total value of a company).  To illustrate why this is a meaningless figure, consider that when bitcoin was trading at $35, if everyone cashed out all their bitcoins, people would have received nowhere near $210,000,000 for them.  Conversely, if I offered to by all bitcoins in existence for $210,000,000, I would have obtained no where near the 6+ million bitcoins that had been mined as of that date.  

It's tempting to think in terms of market cap, but it is in reality an utterly meaningless statistic in relation to bitcoin.  The market cap is just a figure derived from the total number of bitcoins mined and the last trade price.  And the last trade price is a trailing indicator that, depending on circumstances, may not even have any relation to the next trade price.  Open bid and ask orders are better indicators of what the next trade is likely to be, but the open orders on the exchanges have a very wide price range for a relatively small number of bitcoins (compared with the total amount mined).  Again, there is no way that 6+ million bitcoins could have ever been sold for $210,000,000...and I'd say that's still true today.  There's also no way that 6+ million bitcoins could have ever been bought for $210,000,000...and that's also still true today.  I doubt $1 billion could buy you 6+ million bitcoins.

The statistic that is far more relevant is the volume of bitcoin traded for other currencies, goods, or services.  I'd be interested if anyone had some educated guesses on that statistic over time (you can't simply add up exchange volume and block chain volume, but one could come up with some models that incorporated those figures).

Of course, this may be little consolation to those that purchased bitcoin when they were trading at $35.