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Comment by panarky | Hacker News Reader

> its current exchange value, which is the "pot of money"

It's not a "pot of money" because the market cap is not determined by the amount of government currency traded for bitcoin. Trading $100,000,000 for 5,000 bitcoin does not increase the market cap by $100,000,000.

Similarly, trading 5,000 bitcoin for $100,000,000 does not decrease the market cap by $100,000,000.

Since there's a seller for every buyer, there's zero money going into any "pot".

The market cap is determined by what price buyers and sellers agree on at any point in time. That means the market cap can double, or halve, instantly, even though trading volume is a tiny fraction of the change in market cap.

There is no pot.

And it works the same way for every other market, from stocks to bonds to gold and real estate.

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Nevertheless we humans still think of things in terms of pots. The term "pension pot" comes to mind.

The reality is the market value of anything is influenced a great deal by human sentiment, as well as raw intrinsic properties of an underlying asset or the performance of a business.

Investors like to think they are actually "investing" in Google when they buy Alphabet shares even though not a single penny of their money is going to Google for the board to direct toward productive endeavours.

Even earned income in a savings account is an act of faith... in a system that we hope will continue to value an hour of our labour today to something close to what it will be a year from now. The savings account itself isn't a store of value, it's the nature of the labour market here that is actually the store of value.

In the end everything is based on faith. You hope that in the future your stocks/bonds/cash/gold/crypto/bank account/real estate

a) are still recognized as being yours and that

b) some entity will be willing and able to exchange it for something of the same or higher value as you think it has now

The author states this myth perfectly:

Every cryptocurrency is its own pot of money. When people sell, they are taking money out of the pot. When people buy, they are putting money into the pot.

It's a popular myth but it's obviously bogus when you realize that for every buyer there is a seller.

So when people buy a gold bar, or 100 shares of AAPL or a cabin at the lake, the money the buyer puts in is exactly offset by the money the seller takes out.

I'm not trying to argue that the "pot" is an actual pot of money, it's obviously a metaphor.

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