I always love looking at “market cap” for these things. As if every coin there could actually be sold for the price listed making it worth hypothetical billions.
Even a small cash out will cut the value to pieces.
The stock market won't collapse in the same way because stocks have earnings and dividends (which is what the value is largely based upon).
Sure: securities can go up, or down, in price almost arbitrarily. But they largely can't go below zero (aka: bankruptcy law protects against that), and they can't really go below the expected profits of the company (because shareholders are entitled to those profits. Worst-comes-to-worst, the shareholders can demand dividends and cash out through those means)
A lot of companies are 20x or 30x, or more of their expected profits (representing maybe 20 years of profits is roughly the fair price for a typical company's stock price). There are exceptions, especially in growth stage companies (where "profits" is now "expected profits" of the far future: the shareholders believe the company is onto a good idea and are willing to pay more on the hopes that the company becomes very large in the future).
Invidiual stocks collapse all the time. Selling down large positions is a real problem that institutional investors face and they plan for a haircut on the list price when doing so.
The stock market can be priced in BTC and I think this maybe shows that a currency and a stock contract for ownership are fundamentally different. You can't put your money to work in a currency, you just speculate that it might rise in value and have higher conversion rates in the future.
Stocks are also used like a currency in mergers which seems odd but is practical in some circumstances.
Stocks and currency can both become most valuable as TP or wall paper.
The wilds swings in exchange rate is typical of any new currency, even the USD in its early years.
Did the stock market value drop by 50% in the past couple of weeks?
Because BTC has doubled. If you're saying "BTC's price is the fundamental measure" of our economy, then it means we're in a horribly deflationary spiral right now.
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Alternatively, it means that BTC is in a bubble and maybe we can't price things in terms of BTC, because BTC is a horribly volatile asset that almost has no rhyme or reason behind its price movements.
Because its more tax-efficient to reinvest the gains back into the company in most cases.
But if the stock ever crashed to say: the value of the expected dividend... it would make more sense to pay out the dividend rather than invest.
Lets say a company's stock price is $40, and they make $2 per stock of profit one year. They can give out the dividend... or... they can reinvest the money into the company (and theoretically: if the stock market reacts correctly, it would raise the price of the stock to $42).
In contrast: if the stock market fails to react like this, eventually the company will be say: $2 per share. They'll still be making $2 in profits each year however (assuming the fundamentals haven't changed). At this point, it makes sense to pay out a dividend of $2, if their stock price doesn't react.
After all: might as well double your money each year at that point. (Take those $2 dividend, then double your number of shares in the company, then receive double the money next year).
Market cap for publicly traded corporations is still a good measure of value since there are laws, regulations, public disclosures, etc. ensuring they're equally measured to a degree.
If I paid $50000 for a cowry shell and said the market cap of cowry shells is more than MasterCard then there's a few problems...
It depends on the stock and what each individual holder is prepared to sell for. So it's exactly the same. In a corporate buyout the individual sellers typically agree on a sale price, but that's a contract on top of the market. Without that in play you'd be subject to the same unknowns and market cap wouldn't guarantee any buyout price. Hostile takeover is one example.
For stocks though the market cap is judged against earnings typically. The price can never get too low or the shareholders can just force a dividend to make the money directly from the underlying equity.
Even a small cash out will cut the value to pieces.