Ali Hasan
Bitcoin which is also known as Digital Gold or Gold 2.0 is clearly on a roll. It doesn’t want to stop growing. This time bitcoin has crossed $40,000 and JP Morgan says that it can hit $146,000 in the near future. Some even believe that the day is far when bitcoin will be $1 million.
But it’s not just the price that has been on the rise, it’s also the market capitalization. As soon as it crossed the 40K mark, it also created a new world record. Now the global cryptocurrency market cap is over a trillion dollars.
The market cap of all cryptocurrencies rose 10% to $1.042 trillion on Thursday, according to data from CoinMarketCap. Bitcoin accounts for around 69% of the total market capitalization. Bitcoin is followed by Ethereum with a 13% share.
Bitcoin gained $10,000 in just 5 days to get past $40,000. “The market capitalization of crypto to $1 trillion is a strong testament that crypto is here to stay. It has now classified itself as a macro asset class for investments that can’t be ignored. It will further lead greater mainstream acceptance than ever before,” said Sumit Gupta, CEO, and co-founder of CoinDCX.
”The recent Bitcoin rally that has today crossed the record $37,000 mark has positively impacted the Indian market. Globally we are seeing various governments and financial institutions trying to accommodate Crypto into its fold. We remain optimistic that India is a tech and economic power that will emerge as a key player in crypto and blockchain adoption,” added Sumit Gupta.
But after doing some research online, I found that not everyone’s happy with such record growth and many experts still believe that bitcoin might be over-inflated and could be a bubble. Although bitcoin is a valuable asset as it almost tamper-proof and couldn’t be simply printed out of thin air but we all could see a big correction in its value and if it happens, many could lose a huge sum of money.
Some of the major problems that bitcoin has is that it doesn’t produces any value over time. It doesn’t make products and services that add value to the lives of the people. It isn’t a company as well which could justify the term “Market Capitalization” appropriately.
Companies, of course, have real-world assets with economic value. And there are ways to analyse them to work out whether they are over or undervalued, such as price-to-earnings ratios, net profit margins, etc.
With bitcoin, the whole value proposition rests on the idea of the network. If you took away the coinholders there would be literally nothing there, and so bitcoin’s value would fall to nil. Trying to value it by talking about a “market cap” therefore doesn’t make any sense.
Another problem is that although 18.6 million bitcoins have indeed been mined, far fewer can actually be said to be “in circulation” in any meaningful way. For a start, it is estimated that about 20% of bitcoins have been lost in various ways, never to be recovered.
Then there are the so-called “whales” that hold most of the bitcoin, whose dominance of the market has risen in recent months. The top 2.8% of bitcoin addresses now control 95% of the supply (including many that haven’t moved any bitcoin for the past half-decade), and more than 63% of the bitcoin supply hasn’t been moved for the past year, according to recent estimates.
I would like to suggest that you should be very careful while investing into bitcoin and only take calculated risks with the amount you are okay to lose.
