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Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiled by: Bitchain Vision
One of the biggest mistakes of cryptocurrency skeptics is underestimating the market size that cryptocurrencies are designed to disrupt.This leads them to ignore some things that should be taken seriously.
For example: Bitcoin is an asset worth $2.3 trillion.People are often surprised when they hear this number.Few things in the world are worth $2.3 trillion, most of which are household names.Amazon, for example, is worth $2.3 trillion.But Amazon is a service that many people use every day, and Bitcoin is not.
So,Why is Bitcoin worth $2.3 trillion?Because it is entering a very large market.Gold is a $25 trillion asset, and Bitcoin is competing with gold.
This is crucial to its investment logic.
Imagine you have two startups: one trying to disrupt Amazon and the other trying to disrupt gold.To be worth $2.3 trillion, the company that disrupted Amazon would need to occupy 100% of the market, forcing the Seattle-based giant to go bankrupt.Good luck.But if the startup aims to disrupt gold, the situation is very different: To reach a $2.3 trillion valuation, it only needs to take less than 10% of the market.
Bitcoin is not the only example.
pictureBlockchains like Ethereum and Solana are competing for the issuance, trading and settlement of stablecoins and tokenized assets..These are huge markets.According to McKinsey data,The global payments industry processes 3.4 trillion transactions per year, with a value of $1.8 trillion.According to estimates by SIFMA and Savills, the total value of stocks, bonds and real estate is $665 trillion.
trillion?Thousands of billions?These are one of the largest potential markets in the world.
These markets are so big that in fact, no single, centralized company dares to expect to occupy a small part of it.But Ethereum and Solana are different.As decentralized supercomputers of global scale, they have a real chance to capture a significant share.That’s why they are worth about $500 billion and about $100 billion respectively.
Tether’s Valuation
I remembered this phenomenon recently when news came to light that stablecoin issuer Tether was trying to raise funds at a valuation of $500 billion.This will make Tether one of the most valuable startups in the world, alongside OpenAI and SpaceX.
On the one hand, this seems ridiculous.OpenAI is committed to creating universal artificial intelligence, and SpaceX wants humans to land on Mars.Tether basically operates a digital currency market fund.
butTether is targeting a very large market.It has nearly 100% of the stablecoin market in non-Western countries.It is possible that many emerging market countries will change from mainly using their own currencies to using USDT.If this happens, Tether may end up managing trillions of dollars in assets and taking full interest.
As background reference: In 2024, Saudi Aramco achieved its most profitable year in its company’s history, earning $120 billion.Calculated at the current interest rate,If Tether’s assets reach $3 trillion – about 3% of the global money supply – its profits will exceed that figure, become the most profitable company ever.
This should change the way you invest
Understanding that cryptocurrencies are targeting very large markets will change a few things.
First, it allows investors to see the upward potential of cryptocurrencies.These are one of the largest and most important markets in the world.There is a huge difference between targeting Amazon and targeting the entire global payment market.
The second impact is: It makes many investors want to diversify their investments.
Investing in cryptocurrencies is like investing in early-stage startups: You are looking for a black swan.If you find one, the potential for reward is huge.But you have to expect many of the projects you invest in will fail.Even for big projects.Ethereum, Solana, Ripple, Aave, Hyperliquid, Chainlink: Almost every existing crypto project can fail.In fact, I guess there will be more billion-dollar failures in the cryptocurrency space than in any other industry in history.
But I expect these failures to coexist with great success.(This is one of the reasons why I like Bitwise crypto index funds.) Diversified investments turn the question from “what crypto asset will succeed?” to “Will cryptocurrency be more important or less important in five years?
“If you have five minutes today, I encourage you to read the article Black Swan Farming by Paul Graham, founder of Y Combinator. It discusses the economics and strategies for investing in projects with huge potential. If you are investing in cryptocurrencies, that’s what you should be doing.”
Please act accordingly.
