This DeFi trend suggests crypto will reach a market cap in the trillions in the future ๐จ This article is 4 years old...
This DeFi trend suggests crypto will reach a market cap in the trillions in the future
2 min read
Updated: Sep. 29, 2020 at 4:46 pm UTC
While Bitcoin, Ethereum, and other crypto-assets have seen parabolic growth over recent years, they’re far from relevant on a macro scale. Dan Tapiero, the co-founder of DTAP Capital and Gold Bullion Int., summed up the situation well when he wrote:
โ$200 billion too small to matter for macro authorities. Gold is $12 trillion and no one really cares. #Bitcoin has clearance up to at least 250k. 25x before big boy global macro authorities start caring that it exists.โ
According to a fund manager in the space, though, chances are that the crypto market will soon swell to the trillions.
Crypto is on track to hit a multi-trillion-dollar market cap: fund manager
Spencer Noon, the founder of DTC Capital, believes that the crypto market is on track to reach an aggregate market capitalization in the coming years.
His optimistic sentiment came down to one crucial factor: there are billions of “crypto dollars coming on-chain to use DeFi.” Crypto dollars (or cryptodollars) is a term recently used to describe U.S. dollar stablecoins based on decentralized networks such as Tether, USD Coin, and TrueUSD.
“The strong fundamental backdrop to #crypto โ which is unlike any bull market previously โ is that there are billions of cryptodollars coming on-chain to use #DeFi. Unless that shows signs of slowing, we are on track for a multi-trillion dollar aggregate marketcap for the space.”
The strong fundamental backdrop to #crypto โ which is unlike any bull market previously โ is that there are billions of cryptodollars coming on-chain to use #DeFi. Unless that shows signs of slowing, we are on track for a multi-trillion dollar aggregate marketcap for the space.
— Spencer Noon (@spencernoon) September 26, 2020
Noon is right: according to Coin Metrics, there is now more than $20 billion worth of tokenized dollars on blockchains like Ethereum, Tron, and EOS. This is up from the $2-3 billion seen just two years ago.
From on-chain data, it appears that much of these dollars are being put to work in DeFi, where users can earn yields much higher than traditional bank accounts, often on an order of magnitude or two higher.
Eventually, some of the capital stored in crypto dollars may leak into crypto-native assets like Bitcoin or Ethereum, driving them tremendously to the upside due to the fiat amplifier effect. The amplifier effect suggests that each dollar put into the crypto space results in market capitalization growth much larger than one dollar due to liquidity.
Not the only one that thinks so
Noon isn’t the only one that thinks that the crypto market will hit a market capitalization in the trillions in the coming years.
Raoul Pal, CEO of Real Vision and a Wall Street veteran, recently asserted that there’s a good likelihood Bitcoin hits a market capitalization of $10 trillion in the coming decades. That equates to over $500,000 per coin.
Pal is extremely bullish due to multiple aspects of the cryptocurrency market, including monetary policy trends and an extremely positive technical setup.
Chris Burniske of Placeholder Capital is also another bull. He recently said that he thinks that in the upcoming market cycle, BTC and ETH will race each other to a $1 trillion market capitalization each.ย
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Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps).
USD Coin
$0.99966
USD Coin (USDC) is a stablecoin fully backed by the US dollar and developed by the CENTRE consortium.
Tether
$1.00032
Launched in 2014, Tether is a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner.
EOS
$0.65181
EOS is a blockchain protocol that enables horizontal scaling of decentralized applications, allowing developers to efficiently create high performance distributed applications..
Coin Metrics
Coin Metrics is a leading provider of crypto asset market and network data.
A former hedge fund manager who retired at 36, Raoul Pal is a co-founder of Real Vision, a financial media company offering in-depth video interviews and research publications from the worldโs best investors.
Chris Burniskeย is a partner at Placeholder, a New York venture firm that specializes in cryptoassets.