Help me understand crypto Market Cap and the role of new money....

Discussion in 'Crypto Assets' started by NoahA, Oct 8, 2021.

  1. NoahA


    So after seeing @johnarb 's post in Baron's journal, I have been watching some videos from EllioTrades Crypto channel. I'm just trying to get an overhead view of all the different things he is talking about. Its pretty clear to me how if you're gonna play in this sandbox, you almost have to do it full time. Of course for guys who have already struck it rich, its much easier to devote their time to this, but at this advanced stage of the market, there is just far too much out there to have to research.

    Anyway, as a side note, he does caution about a crash by perhaps the end of the month, so that is something to look out for, but its two specific points in this video below that I link below that I'd like to really address.

    He discusses how for every $1 of new money coming into crypto, this has a $25 affect on Market Cap. Can this same thing be said about stocks or is crypto some magical market where with just a little push, you end up going light speed?

    Further to this, he shows how small the crypto market is in reference to the stock market, 2T vs 91T, and states that it will reach hundreds of trillions.

    Now lets look at this from the perspective of the economy. What is the total value of assets in the world if we add equities, precious metals, real estate, etc? I have no idea, but to get to hundreds of trillions from 2 trillion for crypto, this will be one hell of an inflation jump. Can the economy really absorb this? We can't just assume that we can create exponential wealth in a matter of months or years. This money will of course want to be spent, and as it is now with supply shocks and people not wanting to work, all this extra "wealth" will just exacerbate the problem much more. It doesn't matter if you're rich if there is nothing to buy and restaurants are closed since nobody wants to work there.

    I saw in another video that 12% of the US already own some crypto. This is a fairly large percentage if you ask me. I would almost bet less people than this own precious metals in a meaningful amount. But if all of a sudden 12% of the population explode in their wealth, will there be actually anything to buy? Will the other 90% still want to cater to these "fat cats"? The wealth inequality is already so large, and an explosion in crypto market cap will just make it so much worse.

    He talks about the big transformation from brick & mortar to the internet, but if we look at what this did to GDP, we see that it went from roughly 10T in 2000 to 20T in 20 years! This is a decent but consistent rise, and nothing like an explosion where a 2T crypto market cap suddenly overtakes a 91T stock market cap in maybe just a few years.

    So the point I'm trying to make is that some of these claims just don't make sense. You cannot have a crypto market, that essentially produces nothing, match or surpass the market cap of the stock market that is responsible for everything we eat, use and buy. If the crypto market doubles and doubles, what we have is serious inflation, and that is not the type of environment most people want to live in.

    So is it fair to say that an explosion of the crypto market cap is unrealistic? If the crypto market wants to steal some business from traditional finance, then fine, but you can't all of a sudden create 10T or more out of nowhere and expect the rest of the economy to function as normal.

  2. johnarb


    Bro, what happened?

    I recommended to you that YouTube channel to provide you with alpha so you can get your 10's of thousands of percent returns on investments that you're eagerly looking for in cryptos, and I told you to watch many videos over several months

    He talked about recommending cool cats when it was 0.1-0.2 Eth trading currently at 13 Eth and Supducks at 0.01-0.02 Eth currently trading at 3 Eth, do you know how much in $$$ those numbers represent?

    And you start a thread trying to nitpick his latest video about hundreds of trillions of $, please stop. Why would you take everything he says as gospel? Who cares about his opinion on the future of this crypto industry?

    You want to make money or you want to be philosopher arguing with people here on hypotheticals? Maybe we'll have a financial crisis and everyone goes to cryptos or maybe we wont.

    forget about it

    You want to make life-changing profits or you want to discuss hyperbole possibilities?

    He's talking about Metaverse, watch the movie Ready Player ONE and look into Facebook plans on Metaverse

    Look into Snoop Dogg, Tom Brady, Citibank, Stephen Curry, and other influencers getting their foothold on this Metaverse. There's another thread by Daal that already goes much deeper into this

    What's the $$$ value of this new world economy that resides on the internet?

    Who cares????? I gave you alpha so you can make your 10-100x returns that you keep saying you've missed out on cryptos, but instead you create this thread

    I don't think you're gonna get a lot of responses here, btw. I do not think a lot of ET posters are interested in this. Maybe I'm wrong

    Anyway, have fun with your research on the what ifs
    NoahA and Trader Curt like this.

    Unfortunately, crypto markets don't make sense at all.
    Tether is an example of how they are creating money out of nowhere.

    Since you can buy any crypto with it, there is no way to explain why a crypto market behaves the way it does.
  4. MrMuppet


    nahhh dude. just because it doesn't make sense to you doesn't mean it doesn't make sense at all.
    there is a strong global macro force driving that market and that's why it goes bonkers
    johnarb likes this.
  5. Still very much at the early stages of its life at the moment so many cryptos act like any emerging market would.
  6. NoahA


    I do agree that making money is the most important, but I also have to wonder how reasonable some of these people are when they start throwing out numbers that make no sense at all. For something to add more market cap in value than the entire stock market is just nuts. They might as well start paying a fry cook at MacDonald's 250k a year if we want to start throwing out extraordinary numbers.

    But you're right, if he is bringing to light trades that go 10X or more, then this is where the value is. I just haven't watched enough videos to see if the edge is there or not. He may have gotten a few things right, but if he has suggested dozens of ideas that haven't moved or tanked, then he may just be guessing. Its obvious that he pumps out videos like crazy because his YouTube channel is a big cash cow for him, so I also like to take this into account when I'm evaluating a source. Going forward, I can keep track of some of his suggestions and see how they play out.
    johnarb likes this.
  7. RedDuke


    Why not? Impossible already took place - 2 trillion market cap out of absolute nothing, producing nothing. Until all stable coins are regulated and allowed to be created out of thin air, nothing is impossible.

    had it not been for Tethers, we would be no where where we are now. And yet here we are.

    There was a great article on Blomberg about tethers yestarday:

    "In July, Treasury Secretary Janet Yellen summoned the chair of the Federal Reserve, the head of the Securities and Exchange Commission, and six other top officials for a meeting to discuss Tether. The absurdity of the situation couldn’t have been lost on them: Inflation was spiking, a Covid surge threatened the economic recovery, and Yellen wanted to talk about a digital currency dreamed up by the former child actor who’d missed a penalty shot in The Mighty Ducks. But Tether had gotten so large that it threatened to put the U.S. financial system at risk. It was as if a playground snowball fight had escalated so wildly that the Joint Chiefs of Staff were being called in to avert a nuclear war." ........
    NoahA likes this.
  8. NoahA


    But lets not forget, both you and I are mad for missing out. The question is can we still get in now? There will have to be an exit at some point, if only to migrate to some new coin.

    I think the future for crypto is certain, but we have no idea in what shape or form it will be. I saw that article you linked and am in the process of reading it. If 69B in Tether was used to increase the crypto market cap by hundreds of billions, what on earth is going to take it to 10T or 100T?

    My whole point of this thread was that these numbers are just so insane. If you create assets out of thin air to this extent to make everyone feel richer, we see what that does to the world around us. I saw a great video about how all this extra crypto wealth and market gains could be responsible for why so many people are leaving the labor force. If this is in fact true, these crypto market cap numbers being thrown out means that this labor shift will accelerate 10X. At some point, you won't even have develops wanting to work on these projects because they will be ultra rich already. You won't have people making the computer hardware necessary. You won't have workers running the power plants. Everyone will be so rich with a 100T crypto market cap that there won't be a need to work! And, well, we know that this isn't exactly going to be the paradise that it sounds like.

    So I really wonder how big this can grow. If the banking sector drops 50% then I can see how crypto can continue to grow and steal this market share, but this means that the amount of money in finance will stay roughly the same. Heck, people say crypto will mean even less need for the traditional type of finance, so this sector should in the end employ less people and cost less money to function than traditional banks.
    themickey and johnarb like this.
  9. Specterx


    Here's a graphic which gives you an idea of the relative market cap of different asset classes: (crypto is near the top but their figure is outdated, the current market cap is 10x what's shown here)

    Note the above-ground gold held for investment of roughly $6 trillion. That's essentially the portfolio niche that Bitcoin is competing for, once all is said and done and the get-rich-quick speculative players have all sold out. Could BTC ultimately be worth $3 trillion? It seems possible. If rates stay at zero and yields on even junk debt and equities get pushed down to extremely low levels like 1%, then maybe allocations to gold+BTC double and now you have $6trn. That's roughly a 6-fold gain from here.

    ETH is tougher to call. It's like silver in many ways: the smaller cousin to gold for precious-metal bugs, which also has an ongoing source of genuine usage demand (as opposed to reservation/investment demand) for industrial applications. This suggests that it will ultimately be worth far less (in mkt cap terms) than bitcoin, perhaps just 1/50th as much, but let's call it 1/5th of bitcoin's reservation demand or $1.2trn in the bull case, roughly 3x from here. People will come out and mention DeFi and NFTs and so on, but even if these become very successful it's not clear why this boosts the value of the actual ETH token relative to USD. The necessity to hold ETH to settle transactions is likely only a small % of either the long-term reservation demand, or the current speculative demand.

    There are a variety of basic problems with the 'metaverse' concept of a completely separate crypto-native digital economy in which people spend their whole lives online, producing and consuming exclusively in crypto. One is that the tax man wants to be paid in fiat. People didn't spontaneously return to a gold-based economy after 1971 even despite massive inflation during the period. Another is that markets already do exist for digital objects (game skins, in-game items, etc.), artwork, collectables, fine wines and so on, and these markets are tiny - suggesting that the underlying demand for such luxury ornamentation is just not that large relative to yield-producing assets.

    Crypto markets are in an interesting position because, in my opinion, at least 80% and maybe 90%+ of crypto and crypto-related assets like NFTs are held by speculators anticipating massive price gains in the immediate future. Likewise, the maximalist claims of hundred-trillion market caps are just fantasies. Normally, this screams that a market is on the verge of crashing and wiping out the specs. On the other hand, fundamental analysis shows that there's at least the reasonable possibility of 3-6 fold price gains from here for the main tokens. The normal bubble trajectory is to explode far beyond fair value and then crash back towards it - so in an extreme bubble scenario you could indeed see bitcoin at 500k or more for at least a brief time. Obviously individual NFTs and shitcoins can go up millions of percent, but good luck positioning yourself beforehand.

    Anyway, those are my 2c.
  10. johnarb


    There's work to be done

    When he recommends a project, you should join the Discord, ask questions within the community follow the Twitter profile of the devs/artist, see if they're getting meaningful engagements and try to assess organic growth and potential

    If you don't do any of the above, you'll be blind and sell on a pull back. NFT's are very volatile as well as the altcoins he discusses

    Another thing, too, is that you need to make sure you're getting into the correct NFT and not a scam copy as there are many on Open Sea. Similar to any auction marketplaces, you'll want to see a verified (checkmark) banner and description and there's millions of $ worth of sales volume in the past 24 hours

    As I said, I got into Bears Deluxe at entry price of 0.08 Eth, now selling at 3 Eth, it was trading at 4 Eth (and even higher) in my previous post, but that shows you how volatile it is

    I can easily sell all my Bears Deluxe NFT's and profit 6 figures in 11 days with only 4 figures in risk capital, but I'm choosing to still see this project through based on my assessment of the progress and potential
    #10     Oct 8, 2021
    NoahA likes this.