The recent fad of rebasing cryptocurrency is an exploit in the way that we measure market cap. A thread:

The market cap of a cryptocurrency is the total number of tokens in existence multiplied by the spot price of the token. Most people use market cap to measure their holdings.

Rebasing a currency means changing the total amount in circulation. If the price is 10x above the target, give everyone 10x as many tokens. In theory, everyone has the same value.

In practice, the value only adjusts if people increase their sell orders by 10x after the rebase. This often doesn't happen, resulting in a price increase and a market cap increase.

The true value of a token is its market depth, which measures how much people will be willing to buy the token as the price goes down. Rebasing a token does not impact the market depth for that token.

If the market cap goes up with no change to the market depth, you give people greater exit preference. The first person to sell can take a greater percentage of the market depth for themselves, leaving less for everyone else.

The true value of your token holdings is the number you own multiplied by your ability to sell them. This needs to account for the risk that someone exits before you and takes some of the market depth for themselves.

Rebasing seems to increase holdings because people aren't properly accounting for market depth and exit risk when they evaluate their wealth.

This issue applies to all tokens, including Bitcoin. As an industry, we haven't developed effective tools to measure and manage exit risk, resulting in everyone grossly over-estimating their holdings.