A Letter to Jamie Dimon

A very insightful article, except for one part. All “market caps” for crypto assets are nonsense.

Multiplying the last traded price by the units outstanding is meaningless. The total amount of USD or other hard currency you can get for a crypto asset is capped at the amount already put into the exchanges. If USD 10M have been exchanged into crypto asset A, that is the total amount (minus fees and expenses incurred by the exchanges) that all users of A can ever get back out, regardless of what the last traded price was. Unlike a company stock that can put more USD into the system through real world sales, a crypto currency cannot put more hard currency into its system except through exchanges.

This is why there are such bad liquidity problems exchanging crypto assets for hard currency. Any outward exchange strongly moves the USD price, because the pool of hard currency is capped. The only way you can get more hard currency out of a crypto asset than you put in is by convincing other people to put more hard currency into the system (exactly like a Ponzi or pyramid scheme).

So you should completely skip all discussions of market cap. Just focus on the distributed applications and their intrinsic value. Otherwise you open up yourself to devastating counterarguments, which I suspect Dimon already knows, because he has mentioned Ponzi schemes.

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