The total value of all cryptocurrencies passed $1 trillion Wednesday for the first time ever, per CoinGeckoâ€˜s index of 6,124 assets. At its prior peak in late 2017, the marketâ€™s total capitalization was just above $760 billion, according to TradingView.
Bitcoin represents roughly 69% of the marketâ€™s value, according to Messari.
Traders arenâ€™t surprised by the marketâ€™s soaring value.
â€œIs it frothy? A little bit in the short term,â€� said Qiao Wang, co-founder of decentralized finance (DeFi) accelerator firm DeFi Alliance and former quantitative trader at Tower Research. â€œBut is it ridiculous,â€� he asked rhetorically. â€œNope.â€�
Over the past 12 months, the nearly parabolic rise of bitcoin and other cryptocurrencies has come as deep-pocketed institutional investors show increasing interest in bitcoin with a new crop of retail investors following their lead and showing some interesting in alternative cryptocurrencies (altcoins) as well.
Bitcoin has already gained 25% in January, following its more than 300% gain in 2020. Ethereum has also soared over the past 12 months, reaching a total gain of roughly 860% Wednesday after trading above $1,200 for the first time since early 2018.
â€œThe $1 trillion mark cements cryptocurrency as a investable asset class that no longer sits on the fringes of Traditional Finance as a toy for retail investors,â€� said Jack Purdy, decentralized finance analyst at Messari. â€œIt demonstrates that this asset class is large enough to absorb large orders like weâ€™ve seen recently with the slew of institutions entering over the last few months.â€�
Some of those large investments have come from firms like technology firm MicroStrategy, who has scooped up over 70,000 BTC with plans to buy more, and London-based asset manager Ruffer Investment, who dumped $740 million into bitcoin toward the end of 2020.
â€œCryptocurrencies are now almost an institutional-grade venture bet,â€� Wang told CoinDesk. â€œThe market is finally liquid enough to deploy large sums of capital, but still early enough for a 10x return.â€�
For some investors, those returns are coming from altcoins. As bitcoin continues to climb above $30,000, altcoin indexes have gained momentum.
Per FTXâ€™s markets, its index of 10 leading altcoins has rallied over 30% in 2021. The â€œshitcoinâ€� index, representing micro-cap altcoins, has also gained over 20% so far in January.
â€œA trillion dollar market cap is a big milestone for crypto, especially considering it was below $200 billion less than a year ago,â€� said Nate Maddrey, research analyst at Coin Metrics, in a direct message with CoinDesk. â€œBut cryptoâ€™s total market cap is still only a fraction of gold, equities, and many other assets.â€�
From â€œshitcoinâ€� indexes to the bellwether assets like bitcoin, institutional buyers and retail speculators alike can likely find something to pique there interest in this newly-minted, trillion-dollar market.
â€œCrypto is in a unique position to be the most important asset class of the 21st century and still has a lot of room to grow,â€� Maddrey said.
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