As a venture capitalist who invests in cryptocurrency companies, I get asked a lot why I think the crypto market is currently worth $215 trillion.
It’s a valid question. After all, if we were to use the same valuation methods we use for other asset classes, the crypto market would be worth far less than it is today.
The answer isn’t as simple as looking at the number of people with wallets (14 million) or daily transactions (300 million). It’s also not as simple as looking at the number of people who know about cryptocurrency (1 billion) or the number of times cryptocurrency is mentioned in the media (50,000 articles per day).
Instead you need to understand that cryptocurrency has been designed from the ground up to disrupt many different industries (an estimated $200+ trillion of value). These are industries that are traditionally slow moving and very complex — i.e., ripe for disruption.
Cryptocurrency will disrupt these industries by:
Solving problems faster
Creating more efficient systems
Offering a better user experience
The crypto market is valued at $215 trillion with the top 10 cryptocurrencies accounting for $2.1 trillion. This is the conclusion of a new report by Fundstrat, where they analyze the prices of each cryptocurrency using an Enterprise Value (EV) framework.
The value of all cryptoassets is based on their potential to be used as forms of money or as payment systems. This means every token’s value is highly correlated to its monetary policy and the number of tokens in circulation.
In the analysis, Fundstrat uses a valuation framework that derives enterprise value, which includes cash and debt, and divides it by revenue to arrive at a Price-to-Sales multiple (P/S). This is compared to other industries’ P/S ratios to determine how overvalued or undervalued each coin may be.
Top 10 Crypto Assets Have A Market Cap Of $2.1 Trillion
According to the digital assets research company Bitinfocharts, Bitcoin accounts for $1 trillion of this sum with an average price of $61K per coin. Ethereum follows with a total market cap of $214 billion, making up almost 10% of the total cryptoasset market cap.
As for other leading altcoins like Ripple, Cardano and Lite
Market Value of All Cryptocurrencies: $215 Trillion
For simplicity sake one can assume that all digital forms of currency are essentially money. By this definition, there is currently $215 trillion worth of currency in existence (based on the total value of the cryptocurrency market). To put this into perspective, there is a grand total of $7.9 trillion in physical paper money and coins in circulation across the world.
Digital Currency ($215 Trillion) vs Physical Paper Money and Coins ($7.9 Trillion)
What else is there? There is also $80 trillion in gold, $11 trillion in silver, and $2 trillion worth of precious gemstones. While it is true that cryptocurrencies will never be able to substitute for gold or silver, it will still be able to exist alongside them as a form of digital cash. In fact, we are already seeing signs of Bitcoin being used as digital gold and Ether being used as digital oil/gas (in order to run decentralized applications).
The crypto market is worth a lot of money. I’m not just talking about the market capitalization of Bitcoin, but the entire market itself. There are 2,095 cryptocurrencies trading on over 7,000 different markets as of October 2017.
The current combined market capitalization is $200 billion, but that’s only the tip of the iceberg. The crypto market is poised to be much bigger than this and it will likely be one of the most important markets in the world in terms of the economic impact it has on our lives.
We’re just at the beginning of all this. Just like the internet revolutionized information distribution and communication in general, cryptocurrency is overhauling how we store and transfer value on a global scale. It’s important to understand why this matters because we can use this knowledge to invest wisely in this emerging market.
Nasdaq’s CEO recently announced that he has no doubt that digital currencies are going to be a big part of the future. In fact, he believes that the cryptocurrency market could be worth $20 trillion in just a decade. This is an incredibly bullish prediction, especially when you consider that the crypto market is currently valued at just over $200 billion.
That prediction is based on his belief that blockchain technology will fundamentally change the way we live. He also thinks blockchain technology will revolutionize global payments and financial transactions. It’s surprising to hear such a bullish opinion coming from someone in the mainstream finance industry, especially considering how much hype there is surrounding bitcoin and altcoins at the moment.
In fact, it’s no surprise that Nasdaq CEO Adena Friedman sees this much potential in crypto assets. She was an early adopter of Bitcoin & Ethereum. She also understands how blockchain technology will affect the financial industry in ways many people can’t even imagine yet – including most people who work in the crypto space today.
Friedman envisions a world where digital currencies are used for everything from buying groceries to paying taxes. This would require governments and businesses around the world to adopt cryptocurrencies as a medium of exchange at both small-scale
When you invest in stocks, bonds, and other asset classes, you’re purchasing a piece of paper. In the case of stocks, this piece of paper represents equity in a company. In the case of bonds, it represents debt from a government or corporation.
These are IOUs. They’re promises to be paid back, with interest. If you own one of these IOUs, you can exchange it for cash at any time. The cash comes from the issuing government or company.
In the crypto market, investors are speculating on currency that is created by a blockchain network. The currency doesn’t exist beyond its digital form. You don’t own debt or equity in a company just because you own the currency created by that company’s network.
Since the crypto market is based on something that doesn’t exist yet (the value of a digital currency), it’s much riskier and volatile than traditional stocks, bonds, and other asset classes.
Bitcoin is the first, and the biggest, “cryptocurrency” – a decentralised tradeable digital asset. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption – or regulation. That means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it is hard (but not impossible) to trace a bitcoin transaction back to a physical person.
But because it’s entirely digital and doesn’t necessarily correspond to any existing fiat currency, it’s not easy to understand for the newcomer. Let’s break down the basis of exactly what Bitcoin is, how it works, and its possible future in the global economy.