Thread by @ledgerstatus

Alright so, this is where we talk about how money is created.

Most money is created out of thin air. Yes, even in crypto! Newly minted coins are valued based on a minority of coins changing hands and establishing the price.

In a bull market — new inflows enable expansion. 1/n

https://twitter.com/cryptogainz1/status/1301304746108739584

Without new inflows of fiat, or rarely moved bitcoin or Ethereum moving to alts — the natural state of alts is contraction and a zero sum game despite more coins still being added. Most become zombies.

True value requires liquidity 2/n

ledgerstatus.com/zombie-tokens/

When new money comes, and supplies are constricted, valuations can skyrocket. And some people can even sell coins at those levels. They are taking advantage of the rare occasion for liquidity. Many locked investors have a much slower go of it than the degenerate alt slinger. 3/n

Then of course it all climaxes when liquidity is at its greatest, but new flows can not possibly keep up with the valuations. The multiples token valuations versus real liquidity is just too high. And contraction begins again. Most real money leaves. Zombies stay. 4/n

Throughout that, there was a lot of real money changing hands. But the full value can never be truly realized. Remember when Ripple founders were the richest people in the world for like 10 minutes? That’s fake money. The key is to be liquid enough to take advantage. 5/n

Then the long cycle of contraction begins, community members are minted, and those who took the real money out in time never look back (until the market is so dry that it can all happen again). Thus money is created anew. 6/6

Postmortem: This is why a much better qualifier for market cap industry wide would be based on real liquidity, not just supply and price. Liquidity is king. Bitcoin is king. But most of us fish don’t know that unless we unfish ourselves.