>But if you tried to sell some significant fraction of the outstanding coins then the sale price would plummet, and you'd never actually reach $5M total.
You can't focus on sellers and ignore buyers when discussing the valuation of something. If many people want to sell and few people want to buy the price will of course go down. But if many people want to buy and few people want to sell then the price will go up. This isn't a particularly interesting observation.
To put it another way: you are right that if everyone who held a portion of this asset tried to sell right now they would not cumulatively get $5 million, BUT ALSO, if someone wanted to buy all of this asset they would pay significantly more than $5 million. It goes both ways. Changing the balance of supply and demand necessarily changes value.
I do agree that naively using the price of a single trade can be misleading and prone to manipulation.
Another salient point is that when an entity buys all the shares of a company they pay a premium over the current share price indicating that the company is perceived by the market to be more valuable with a single shareholder than with widely dispersed shares.
A cryptocurrency with a single sharehodler is a non sequitor and essentially worthless.
You've put it into words better than I have. To acquire all shares of a company requires a premium, but to acquire all shares of a crypto makes it worthless. Companies and cryptos are not remotely the same thing and frankly "market cap" is a misnomer when applied to cryptos; it misleads more than it enlightens.
You can't focus on sellers and ignore buyers when discussing the valuation of something. If many people want to sell and few people want to buy the price will of course go down. But if many people want to buy and few people want to sell then the price will go up. This isn't a particularly interesting observation.
To put it another way: you are right that if everyone who held a portion of this asset tried to sell right now they would not cumulatively get $5 million, BUT ALSO, if someone wanted to buy all of this asset they would pay significantly more than $5 million. It goes both ways. Changing the balance of supply and demand necessarily changes value.
I do agree that naively using the price of a single trade can be misleading and prone to manipulation.