What is the potential for Bitcoin and cryptos and is it too late to get in?
Bitcoin and cryptocurrencies are really exciting topic these days, especially when Bitcoin price reaches new highs and all we can see is multiplying dollar signs from our portfolios. Happy days!
But is it too late to get into ‘Bitcoin’ or other ‘cryptos’? Have you missed out on the opportunity to have a stake in this exciting new technology? I think the answer is a definite no, it’s not too late, in fact, it’s just the beginning. We are still in the very early days of this fundamental transformation of the financial system and we have a long, long way to go. Let’s look at some figures.
The market cap for all cryptos combined has recently surpassed the 200 billion dollar mark. That sounds like a big sum for us mortal humans, however let’s compare it to something of a relative size. If we were to pretend that Bitcoin and all cryptocurrencies combined are a company valued at around $200 billion, then it would equal to just under 50% of what Amazon is worth, or around 30% of Microsoft, or under 25% if we looked at Apple. So on a best day you could buy ‘a quarter’ of Apple Inc. if you liquidated all the money in the crypto market.
Following that trait, if we imagined that cryptos were a company listed in a stock market, then it would be ranking in the 29th place in the S&P 500 rating (the top 500 companies by market capitalization listed on American stock exchanges). Not bad!
But we know that cryptocurrencies utility lies in trust and the ability to exchange wealth. They are a financial instrument. So rather than looking at a stock market, we are better comparing it to something more of a similar nature, like the Forex market, where various currencies from around the world are traded every day.
So to put things into perspective, daily volume of trades on the stock market comes up to $84 billion, whereas the daily trade volume on Forex comes up to around $4 trillion. This means that stock market trading equals to just over 2% of Forex volume, or in other words, Forex volume is 47 times bigger than the stock market. Wow, pretty big difference and a lot more activity in the currency markets.
If we were to compare the size of all cryptos combined to the total money supply in the world alone (just money, excluding other stocks, gold or other precious metals, real estate, etc.) which is estimated to be around $90 trillion, then cryptos come up to a whopping 0,22%...are you starting to get the picture?
Recently, it was announced that world’s largest derivatives exchange CME is planning to launch the futures contract of Bitcoin. This marks a major step in the digital currency’s path toward mainstream acceptance. This is huge news, as it sees the acceptance of Bitcoin and cryptocurrencies as a new asset class. It also happens that ‘derivatives’ are a whole different ball game.
Let’s have a look. If you thought that a total money supply in the world came up to a fairly decent sum, you will be gobsmacked when you see what the value of derivatives is. No one exactly knows the correct number but it is estimated that the value of derivatives is in the region between $544 trillion on the low end, and 1.2 QUADRILLION on the high end. This is a lot of zeros. That puts cryptos at 0,03% to 0,01% of the current derivatives value. This article (http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/) provides a really nice visualisation of this concept that really shows the scale of things.
If cryptos were to take just 1% of the low end of derivatives alone, that would put it at a market cap of five trillion and four hundred forty billion dollars. This would be a 27 times increase to where we’re at today. Not bad. That is of course, if there wasn’t a single new crypto coin issued to the blockchain, ekhm, ekhm :)
I took a very ‘crude’ look at things in this article but hopefully, you can agree that there is definitely a lot more room to grow…a loooooooooooot (did you note the number of zeros??)…so start learning more about cryptos and begin an exciting journey of next technological revolution.
References
http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/
http://www.reuters.com/article/us-cme-group-bitcoin/cmes-melamed-sees-bitcoin-becoming-new-asset-class-idUSKBN1D712M
https://cryptolization.com/