I had a conversation last weekend with someone who argued that crypto is limiting equities gains. They argued that every dollar that is invested in crypto is a dollar that would otherwise be invested in equities. I argued that the miners probably buy stocks or real estate with the cash they get when selling the mined crypto, so the effect on conventional instruments should be negligible if not a wash. What’s your opinion? Is there a way to quantify this?
How much money has crypto removed from the equities market?
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With a market cap of £1.3tn, Bitcoin is a fraction of the overall size of the equity market, so I would have thought any effect would be marginal. Apple alone is twice the size of bitcoin.
Might be a different story is it ever reaches the oft touted $1m (market cap $18tn). The capital would have to come from somewhere...
Might be a different story is it ever reaches the oft touted $1m (market cap $18tn). The capital would have to come from somewhere...
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How much of the purchases of crypto are actually from miners vs previous holders?
I think it's also going to be complicated because of tether, futures, etc.
To try to simplify:
Imagine you have a non-productive asset of fixed supply. If the market cap is going up, money must be going in.
Considering where the money goes that was spent , it could go anywhere, such as lambos. I don't think it's reasonable to assume 100% of it would go into long term productive assets. If 50% of it goes into short term rapidly depreciating items, that seems like a lot of demand destruction for stocks.
I think it's also going to be complicated because of tether, futures, etc.
To try to simplify:
Imagine you have a non-productive asset of fixed supply. If the market cap is going up, money must be going in.
Considering where the money goes that was spent , it could go anywhere, such as lambos. I don't think it's reasonable to assume 100% of it would go into long term productive assets. If 50% of it goes into short term rapidly depreciating items, that seems like a lot of demand destruction for stocks.
There is no proof of the hypotheses. . One can argue equally that the money would be invested in forex or commodities or antique cars.
The point that they were trying to make was that other instruments would be higher if crypto didn’t exist. The current estimated market cap of all crypto is about 2.5T, but that doesn’t give a good picture of the actual capital that flowed into the crypto space. My conversation partner was pushing that crypto produces nothing and sucks capital from investments that produce real good and services. I’m just trying to come up with a number that represents the actual amount of capital that has been put into crypto. None of this really matters to me as far as my crypto holdings are concerned but it would be interesting to know how much money has moved from other spaces to this one. ETF inflows were mentioned here but that’s a small percentage of crypto market cap that was purchased recently at the top 20% of crypto valuations. 2010 through 2016 cash inflows should really drag the number I’m looking for down.
I don't think you can look at market cap because with crypto I can make a meme coin (1 billion tokens) and sell one for a dollar. Is that meme coin's market cap $1 billion? Looking at money markets or bank deposits might work
I keep hearing crypto is an inflation hedge, so why is bitcoin rising all while inflation has literally collapsed from 9% to 3% in the last 18 months
Also iff equity markets are always forward looking how can it be both equities and bitcoin are rising at the same time?