According to data from CoinGecko, the overall cryptocurrency market capitalization has reached a whopping amount of $1 trillion in value, just a few days into 2021. This is another huge milestone for the budding crypto space, with over 6,124 digital assets currently listed. However, despite this landmark, the cryptocurrency market’s total capitalization compared to other financial markets is still a small fraction. Commodities such as gold currently boost a market capitalization even bigger than the whole crypto space.
Leading the race is Bitcoin, as the absolute leader in terms of its $674 billion market cap, sucking up to 68.5% of the market, followed by Ethereum whose market capitalization is of $135 billion, that’s 13.3% of the market dominance as at the time of writing this.
Since the end of Q2 of 2020, Bitcoin and the altcoins market have garnered unprecedented interests from a growing list of Institutions as well as a new influx of retail investors, with no sign of stopping. Huge investments have been flowing into crypto from firms like MicroStrategy, who has bought up over 70,000 bitcoins with future plans to buy more, and London-based asset manager Ruffer Investment, who dumped more than $740 million into bitcoin toward the end of 2020.
The $1 Trillion zone shows cryptocurrency as a potential safe-haven asset and a hedge against inflation that no longer sits on the marginal part of traditional finance and having the potential for greater risk-adjusted returns compared to traditional investments. This milestone enables the cryptocurrency market to have enough liquidity to deploy large sums of transactions, but still early enough for a 10x return.
The last time the cryptocurrency market has witnessed such a bullish rally was in 2017. When the overall cryptocurrency market cap reached around $829 billion before a deep plunge that resulted in a two year bear market.
But how does the cryptocurrency market rank compared to other financial markets like the Forex and Stocks market?
Comparison of these three financial markets will clearly show that the cryptocurrency market is still nascent. Although the crypto market is just 12 years old, it still has enough room for big growth.
In November, 2020, the total stock exchanges have a combined market capitalization of $85 trillion USD by data from Spendmenot. Majorly, the stock market consists of New York Stock Exchange, NASDAQ, London Stock Exchange, Tokyo Stock Exchange as well as others. The New York Stock Exchange, however, is the largest stock exchange in the world, with an equity market capitalization over $25 Trillion in April 2020.
According to Brokernotes, the total market capitalization for the Forex market is around $1.93 quadrillion, which is 2.5X larger than the global GDP. Also, $5.3 trillion dollars per are traded daily in the Forex market with his major transactions happening around 7 currency pairs; EURUSD, USDJPY, GBPUSD, AUDUSD, NZDUSD, USDCAD, USDCHF and while various transactions occurring across several crypto assets.
Both Crypto, Stocks and Forex markets are controlled by the market forces. The Forex market has the highest liquidity compared to others and its daily volume is about 53 times greater than the New York stock exchange.
Market capitalization is a well-known key metric for traditional securities. In the Stocks market, it consists of multiplying the amount of outstanding stock shares by the current stock price. While in the cryptocurrency market, is the circulating supply of tokens multiplied by current price.
Stock markets have always been analyzed via financial metrics and ratios. Measures like price-to-earnings ratio, earnings per share, the current ratio, earnings growth etc. Most cryptocurrency startups or companies do not publish their financial statements, so the market capitalization provides a quick and easy check on how valuable a cryptocurrency is while other key metrics are volumes, futures premium and top traders’ position at major exchanges.
An article released by Conhen & Co on October, 2020 in which several experts in the crypto space at Cohen Client Conference discussed the maturity of the cryptocurrency marketplace and ecosystem. On the scale of 1-10, the panelists response ranged from 2 to 6.
Cryptocurrencies are here to stay. Recently, the Office of the Comptroller (OCC) of Washington recently published a letter allowing Federal Chartered Banks and Thrifts to allow stablecoins i.e USD Coin (USDC) as a mainstream payment medium for all forms payment and transactions. This is a significant indicator that the cryptocurrency market is still a baby growing into maturity in terms of growth and diversification.