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Comparing Cryptocurrency Market Capitalizations to Other Assets

September 08, 2022 - 9 min read

Market capitalization of a cryptocurrency is the total value of all the coins which were created.

Market cap is a quick and easy way to estimate the value of a publicly traded company. It serves as a key indicator for investors since it can be used to evaluate the value of a company and, as a result, to compare two businesses in the same sector or estimate the risk of an investment. 

Investors in the stock market should consider market capitalization. Cryptocurrency investors, on the other hand, face a different set of challenges. Even though the entire value of a company’s stock can help investors establish and maintain a well-balanced investment portfolio, experts warn that such criteria don’t precisely apply to crypto investors.

What is Cryptocurrency Market Capitalization?

The market capitalization of a cryptocurrency is determined by multiplying the total number of coins in circulation by the current value of each coin.

For example, the current market value of Bitcoin is calculated by multiplying the total number of Bitcoins in circulation (approx. 19.1 million) by the current Bitcoin price. Market capitalization fluctuates with Bitcoin’s price regularly. 

For example, a Bitcoin (BTC) price of $21,661 multiplied by a total supply of 19.102 million equals around $414.2 billion.

Ethereum has a market capitalization of around $228 billion when the price is $2,000 and around 120 million in circulation. Ethereum’s market valuation is lower, even though many more coins are in circulation. Market capitalization evaluates an asset’s value based on its current market price. In contrast, market value is the value the investing community attributes to certain assets. The term “market value” is also frequently used to describe publicly listed assets’ market capitalization.

Why is Market Cap Important?

The price of a cryptocurrency is one-way people can measure its value. Market capitalization is a metric that investors utilize to convey a complete story and compare the worth of various cryptocurrencies. It is a vital metric that can be used to determine a cryptocurrency’s growth potential and whether it is safe to buy compared to other cryptocurrencies.

You can compare the overall worth of one cryptocurrency to another using a market cap, enabling you to make better-educated judgments regarding your investments. 

What Exactly Does it Mean for the Market Capitalization of an Asset?

An asset’s market capitalization is an assessment of its overall value based on its current price in the market. It is computed in a variety of different methods, according to the type of asset being considered:

When determining the market capitalization of precious metals, the price of the metal is multiplied by an estimate of the amount of metal extracted from the earth up to this point. These estimates are modified yearly.

In the case of stocks, it is determined by multiplying the total number of shares that are currently in circulation by the share price.

Top Precious Metal by Market Capitalization

Some may think that the price of Bitcoin may have surpassed the cost of an ounce of gold by comparing the price of one Bitcoin to the price of gold. However, comparing the cost of one Bitcoin to an ounce of gold is not necessarily the best basis of comparison. Based on all of the gold that has been mined up to this point, if we attempted to estimate the market capitalization of gold, we would arrive at a total value of around $11.3 trillion. As of January 1, 2022, the market capitalization of Bitcoin was approximately $902.1 billion, demonstrating a significant difference.

Returning to the cost comparison: An asset’s market capitalization, not just its price, is what matters. In contrast, gold is a vehicle for storing value that lasts centuries.

Gold is comparatively bigger than the cryptocurrency industry, with a market worth of $11.3 trillion. On the other hand, Bitcoin, sometimes known as “digital gold,” has a market cap much smaller than gold.

Does Crypto Market Capitalization Determine Price Volatility?

Bitcoin is essentially the only cryptocurrency not associated with a particular founder, organization, or company. Even though it was developed by someone going by the pseudonym of Satoshi Nakamoto, no one is sure who this person is. This indicates that various crypto assets provide several data points that investors can analyze. For instance, any statement made by Vitalik Buterin, Co-founder of Ethereum, is digested thoroughly and can affect the market cap of Ethereum. 

Some alternative cryptocurrencies with a market valuation of less than $1 billion are more susceptible to higher volatility and swings in value, just like sparsely traded stocks. 

Real Estate, Equities, and Crypto Market Capitalization

The world’s real estate market is considered to be almost four times as big as the global GDP, which is approximately $340 trillion. When compared with the market cap of cryptocurrency, the world’s real estate market value is many times larger than the market cap of all cryptocurrencies combined. Nevertheless, crypto is still a small market compared to the global equity market, which is currently worth around $122 trillion. The total value of the cryptocurrency market is in a different order of magnitude and still would have to surpass that of the equity market in the European Union, which is valued at $14 trillion, or the equity market in the United States, which is valued at $50 trillion.

Global GDP and Crypto Market Capitalization

The value of the products and services that are generated inside a country is known as the Gross Domestic Product (GDP), and the cryptocurrency market compares well to this figure. The total crypto market cap would be positioned among the top 20, about in the middle between Mexico ($1.151 trillion) and Indonesia ($1.015 trillion).

On the same date, the countries that are a significant distance ahead are Japan ($4.874 trillion), China ($12.223 trillion), and the United States ($19.594 trillion). In the meantime, Bitcoin by itself would be able to crack the top 26, just above Austria ($417 billion). Even though the global debt levels have reached a record high of $226 trillion and are entirely unattainable, the market valuation of cryptocurrencies is very close to that of Mexico, which is hovering at $1.151 trillion recently. The US budget deficit for 2021 was estimated to be $2.77 trillion, and the burden of US student debt is estimated to be $1.7 trillion.

The total value of all Bitcoins in circulation is currently more significant than the gross domestic product of several countries, including Norway, Austria, and the United Arab Emirates.

World’s Top Industries, Stocks, and Crypto Market Capitalization

With a market capitalization of $2.98 trillion in January of 2022, Apple is the world’s most valuable publicly traded business. The second-placed company, Microsoft, has a market cap of $2.51 trillion, and the third-placed company, Alphabet, has a market cap close to $2 trillion. On January 1, 2022, the total market cap of all cryptocurrencies was about $2.25 trillion. Compared to other global industries, the cryptocurrency industry also finished 2017 in the top ten.

At its peak (in November 2021), even though the total market cap of all cryptocurrencies had nearly caught up to the manufacturing of automobiles ($3 trillion), the cryptocurrency business is still behind the exploration of oil and gas ($4.6 trillion) and the production of food ($ 5trillion).

According to a report published in January 2021, the global financial services business remains unattainable, with a market value of $22.5 trillion at the top. Finally, the market capitalization of cryptocurrencies is incredibly close to that of the world’s top technology companies compared to the equities that have performed the best around the globe.

Shiba Inu Competes with Dogecoin to Emerge as Top Memecoin

On August 1, 2020, the introduction of the Shiba Inu token was made public. One quadrillion tokens were minted on that day. Vitalik Buterin, the founder of Ethereum, received nearly half of the one quadrillion tokens that Shiba Inu’s founder permitted. A few of the market’s cutest cryptocurrencies include Shiba Inu and Dogecoin. Since their inception, Dogecoin and Shiba Inu have been fierce competitors. The majority of cryptocurrencies, including Dogecoin, are decentralized currencies with their own blockchains. Shiba Inu, on the other hand, has a slightly different mechanism. It’s not a coin but a token. The Ethereum blockchain serves as the foundation for Shiba Inu. Tokens and coins are not identical, as prominent cryptocurrencies like DOGE and BTC have separate blockchains.

Dogecoin has a total supply of 132.7 billion coins and has recently traded for slightly more than $0.08 per coin, with market capitalization of over $10 billion. Dogecoin has a larger market cap than Shiba Inu, but Shiba Inu has a much larger total supply. Shiba Inu coins circulating supply is roughly $549 trillion and a recent price of about $0.00001545. The token’s actual worth is approximately $9 billion. By 2022, DOGE had fallen from grace and had lost more than 80% of its value from its peak ($0.73).

Through a variety of activities put forth by developers, the two cryptos have emerged from their slumber. Shiba Inu is getting ready to introduce the Shibarium layer-2 solution to the market to attract more investors. However, because of the delay, investors are again concerned about the relevance of the launch. In addition, the developers established the Shibburn concept to increase the demand for the coin by lowering its market supply. In 2022, the price of cryptocurrencies is expected to climb due to these measures. 

Final Thoughts

Despite their phenomenal increase over the previous six years, cryptocurrencies still have a small market capitalization compared to traditional asset classes. More specifically, its market cap is still smaller than that of Amazon, which is currently the publicly listed firm with the most significant market cap in the US stock market. Nevertheless, cryptocurrency has validated its position as a new asset class that is here to stay, and it has done so by making a public proclamation. Even though it is still early, it has matured quite a bit since 2017, when it was near reaching this milestone for the first time. Cryptocurrencies are still very volatile and not for those who are easily frightened, but it has reduced the risks associated with the primary bull market.

To level up and gain a deeper knowledge of all things related to the future of the cryptocurrency industry, check out the latest content in the Supra Academy section.

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