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Originally Posted by SeoDealer
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To be more precise,it'd mean that another 1.3Trillion $s should be invested in it..and such sums are extremely hard to cumulate in 1 year.. especially considering that till now,only 630 BILLIONS (which is half of 1.3T) were invested in these years..
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Just because I'm bored on a Saturday afternoon, I thought I'd add some insight. But first, anyone know of news that is driving this latest surge in BTC? All I could find was that LL Cool J was starting a crypto fund. I mean, he is the executioner, but not sure that's enough to have ignited this rocket
Anyway, about market cap and the tricks of the Street (Wall street that is)...
Imagine you need to make a billion dollars fast - like right away. How could you do it?
Probably the easiest answer is by co-creating a company that has a 2 billion dollar market capitalization with a close friend.
But wait, you say, I have no close friends that have billions of dollars! No problem, it's all about the books.
So you form this company and you give yourself and your friend each 100 shares. Since the company is currently worth zero, let's say you drop $100 bucks in a seed funding.
Next, you sell your friend one of your shares for $100. Now the company is a shell that has a total asset value of $100; however, it has issued 200 shares, and the share price is listed as $100 because of the one and only sale. What's the company worth? On the books, it has a market cap of $20,000! That's 200 shares at a value of $100 each.
Now let's do this again, except you don't issue only 100 shares each, but you issued 100,000,000 shares to each of you. Again you sell your friend 1 share for $100, and presto, the market cap of the company is suddenly $2,000,000,000!! Congrats, on paper, you are now a billionaire!
The point is that Bitcoin could gain a market cap in the trillions with nothing more than a few billion dollars actually being invested from here. It works because only a small fraction of the coins outstanding actually trade on any given day, and the value of the market cap is determined by multiplying the total number of Bitcoins in existence by the most recent price at which any fraction of a Bitcoin changed hands.
It also vividly demonstrates how paper valuations can entirely detach from reality, and that you don't actually have the wealth you see on paper unless and until you are able to extract if from the market.
I hope you enjoyed this little primer!