There is more money than ever in cryptocurrencies, but what does this mean?
The crypto market cap – the value of all cryptocurrency tokens in circulation – currently stands at $ 2.6 trillion, according to data from CoinMarketCap. It crossed the $ 3 trillion mark on November 9, but has fallen again since. To give a bit of context, the market caps of Apple and Microsoft, the world’s two largest companies, are each around $ 2.5 trillion.
But it is a little misleading to compare an entire industry to a single company. Here are four ways to understand this number.
1. Crypto still represents a small percentage of global stocks
According to Statistica, the total value of global equity trading in the world was $ 37.69 trillion at the end of the second quarter of this year. At this point, the crypto’s market cap was around $ 1.4 trillion, or just 3.7% of that total.
Despite all the headlines and excitement surrounding the crypto industry, it still only makes up a small percentage of global stocks.
2. Bitcoin accounts for over a third of the total crypto market capitalization
Bitcoin (BTC), the first and largest cryptocurrency, has a market capitalization of around $ 1,000 billion, which is 38% of the entire industry.
While it is unrealistic to compare the cryptocurrency industry to large companies, we can compare individual coins to companies of similar size. Bitcoin’s market capitalization places it at the level of the top 10 global companies like Tesla or Meta (Facebook).
3. There are now over 14,000 cryptocurrencies
According to CoinMarketCap, there are now over 14,000 cryptocurrencies available. Some of them are tiny and extremely hard to find. Others are big companies trying to solve real world problems. That said, it’s worth noting that the top 10 cryptocurrencies account for $ 2,000 billion in total market capitalization, or more than three-quarters of the total.
There are also 430 cryptocurrency exchanges, making it easier than ever to create an account and trade. However, it is a good idea to stick with reputable exchanges that are licensed to operate where you live. This way, you are less likely to fall victim to fraudulent exchanges.
4. The crypto market cap has grown 230% this year
At the start of this year, the total crypto market cap was $ 768 billion. Even taking into account the recent drop, it is still up over 230% since January 1. Now some coins have massively surpassed that – for example, the price of Solana (SOL) has increased by over 14,000%. But some parts have also failed. And others, like Squid Game (SQUID), have turned out to be huge scams.
What’s the next step for crypto?
Even the most avid crypto critics cannot deny the incredible growth the cryptocurrency industry has experienced this year. What that means for 2022 and beyond depends a lot on the value you place on cryptocurrencies and the impact of blockchain technology on our lives.
For example, maybe – like many Bitcoin critics – you think cryptocurrency has no intrinsic value. If so, the rise in cryptocurrency prices will only reinforce the idea that this is a bubble that could eventually burst, leaving investors with nothing.
But you might think that cryptocurrencies will be the medium of exchange of the future, or that they represent the next internet, and that blockchain technology could be transformative. In this case, you may think that the above statistics are just the beginning – and that 3.7% of the value of global stocks is just the beginning.
Whichever side of the fence you fall on, one risk that should not be underestimated is increased crypto regulation. Many governments around the world have yet to release clear guidelines on how cryptocurrency will be regulated. As this becomes clearer, it will likely have a big impact on the development of the industry, for better or for worse.
Keep it in perspective
When you see coins earning over 5,000% in less than a year, it’s understandable to want some exposure to the crypto industry. But since these investments also carry significant risks, it is also important to balance this exposure with low risk investments.
Even with the extraordinary gains we’ve seen, cryptocurrencies still represent only a small fraction of the global economy. As an investor, this fact alone can help keep this new market in perspective.
It makes sense to ensure that cryptocurrency is only a small part of your overall investment portfolio. This way, if the crypto reviews are correct and the market collapses, you will minimize your losses. And if they are wrong, you can still reap rewards.