You are wrong. No value can be added to crypto except through fiat deposit. Publicly traded companies create value by their activity. For example, if I own a share of AT&T, the value of that share goes up if AT&T runs a successful marketing campaign to get new users to sign up.
Not quite! Shares of AT&T go up because people spend fiat on buying them. The activity makes it a more attractive buy, but unless the company buys back it’s own shares they don’t go up when they make money. It’s not magic, it’s a market like anything else.
Note: AT&T is a dividend share, so it has yield. Cryptocurrencies generally don’t, they are more like tech stocks. Amazon shares don’t go up when Amazon makes money (unless they spend earnings on stock), or the market buys more Amazon stock.
That's not the full story. A company's share price drops when it pays a dividend - because it now has less money. So when a company makes money its share price does go up.
SharePrice = CompanyValue / NumberOfShares
Now it's true that trading activity can affect the share price too, for example a short squeeze. But this is due to market taking advantage of a desperate buyer rather than anything to do with the company's performance as such.
I think it is the full story.
Company performance is the driver, but it doesn’t set the price. It not right to say it’s irrelevant, it is, but the most important thing is what the market is willing to pay.
The dividend price drops occurs only because the market believe this and reduces the price of their orders. It’s driven by the market responding to the loss of cash, the fact the cash was spent cannot impact share price unless there is buying and selling. The company doesn’t set the share price except for IPO.
It is compounded by Dividend Reinvestment Programs, where the dividends end up buying more stock.
Additionally, I think your equation is wrong.
Company Value = assets - liabilities.
Market cap = n shares * price.
Market cap != company value.
Big tech stock is very similar to cryptocurrency. It’s all about the greater fool who will buy it from you.
> It not right to say it’s irrelevant, it is, but the most important thing is what the market is willing to pay
That's what he's saying, just he's a step ahead of you. Why is the market willing to pay that much? Because that is what they see the company being worth in the future. Repeated studies consistently the correlation between stock price and future returns to investors when adjusted for other factors that might shift value away from the investor (eg, bad governance, risk, etc). There is no predictor that is better (this is important part - its comparisons against other indicators when trying to predict the future - bc predicting the future is kind of difficult).
> Additionally, I think your equation is wrong.
market cap is forward looking. balance sheet value is backwards looking. market cap is also a guess on how much is returned to investors and not taken by other factors - legal, illegal, intended, or unintended.
Viewing the market as irrational is essentially an anti-science stance - its religious. There is no way to prove that belief wrong because people just keep saying its being irrational when it disagrees with their valuation.
Shares have dividends and represent a share of ownership of the underlying book value. The book value of a bitcoin is $0. Shares also come with a vote.
Crypto has no utility and no underlying value.