Positive wealth effect = increase in marketcap : net virgin demand
In CKG case, there was $50k new money wanting in, which ended up raising the marketcap to $500k, making the wealth effect coefficient of 10x.
I see what you mean. It's a function of the strength of the holders' hands. The stronger the hands, the greater the wealth effect. As your excellent analysis of dishoarding shows, there's an incentive to hold for the first few doublings (whatever starts to be life-changing), then sell at a certain rate, so it doesn't seem that useful to generalize from an example where the maximum any holder could have made by selling is way less than $50,000.
However, your point holds to a degree because the 10% are very motivated to hold at first. But I think "at first" are the operative words. There's a whole lot of upside to traverse between, for example, XMR and BTC. All the more so in the case of an empty ledger or new coin.
I'm actually not talking about spinoffs here. I just used the word "ledger" because that's one of my preferred terms for "coin" or "altcoin." I meant that the 90% will sell their allocations in the altcoin and buy more BTC, for the reasons mentioned above, and that I think this negates the small float effect.
Yes, you are talking about spinoffs, because in an
exit situation to a new ledger, the 90% does not have any allocations in the new ledger that they could sell unless they buy them first, negating your point instead.
I think I addressed this by saying that people wouldn't switch to a new coin all at once in any case, unless Bitcoin was already doomed. They need years of testing, high valuations, etc.
we can say the effect should be mitigated/eliminated by arbitrageurs - as long as fairly basic market infrastructure is there.
I agree that if the old chain survives the initial crash without it causing a descent to abyss (BTC has many examples of survival!), then in the long term the valuations of the chains adjust to represent market perceptions. Yet as the science of determining a correct valuation for a cryptocoin is completely unestablished even in the best minds, not only in the markets, it may well be that in a "successful" 10% exit, the end state is much different than 90/10. I don't claim any reasonable powers to forecast, even after more research on the subject than most.
There is however the case that the old chain is destroyed by the initial exodus of capital and market crash, and the general loss of confidence that results. Just see what has happened to shitcoins.
I still think this whole scenario ultimately relies on long-term holders getting spooked by short-term gyrations absent fundamentals, and that those gyrations probably wouldn't be allowed to happen by the arbitrageurs. However, I should note that I personally don't necessarily even think that if, for example, Dogecoin temporarily
exceeded Bitcoin's market cap in a crazy rally that it would spell doom for Bitcoin. I take seriously the ledger-refinement point that has endowed Bitcoin with uniquely strong hands over the years, and of course Bitcoin's position isn't maintained merely by its price, but by infrastructure, track record, dev team, length of time at very high valuations (gigantic bullseye for attackers), etc.
