What is the potential market cap of crypto?

This is a loaded question since we have to first define crypto. A number of years ago I made a prediction that the market cap would reach $1 quadrillion. At that time, most thought of crypto as simply Bitcoin or Ethereum. Today, there are still large numbers of people who think the same way.

However, we are seeing more innovation and expansion of tokens. The age of tokenization is upon us with a multiple of other types of assets showing up. In addition to stablecoins, we have the upcoming shift of real world assets, many of which will be tokenized.

Some securities such as US Treasuries are already finding their way into this realm. Granted, for the moment, they are in the testing phase. That said, this will likely evolve into something much larger as the speed, reduced cost, and efficiency of tokenization takes over.

Therefore, in this article, we will give an update since the initial prediction was made so many years ago.

Crypto Market Cap: $1 Quadrillion Due In The Future

Back in 2018, my prediction of a $1 quadrillion market cap was based upon the idea of financial innovation appearing in the crypto market.

In fact, one assessment turned out to be correct, although the time was off by a few years.

Do you think it a coincidence that the reports are now coming out that an ETF will be approved in February. That will be the beginning of liftoff. Between now and then, they will buy up all they can.

Those reports were wrong but the idea that crypto would have a "liftoff" once approved was spot on. We saw an explosion over the past couple years, something that is showing few signs of slowing. The money that poured into Bitcoin and Ethereum ETFs is stunning.

Wall Street jumping in was also not a major surprise.

Make no mistake, this is not a small market that is developing. Wall Street is aware of how big it will be. We are seeing the tokenization of the world starting. This means every asset class will be liquid. It will also be decentralized.

Again, we see delay in the entry, mostly due to regulation. Back in 2018, the US government stance was not overly against crypto. That changed with the entry of the Biden administration in 2021. Since the approach there was to try and destroy crypto (Operation Chokepoint 2.0), we saw a delay in the rollout of most things.

We are witnessing the fruits of that emerging.

The final piece to focus upon from that article is this:

In the past I wrote how the market for cryptocurrencies will hit a quadrillion dollars. Now, this is not only the currencies as we know them today. There will be security tokens which amounts to hundreds of trillions of dollars. We are also going to see what I term "Income" tokens. These tokens will represent the cash flow on a piece of real estate, as an example. Hence, we could have two different tokens on the same property (actually 3 when you consider the main digital asset which the other tokens are tied to).

The terminology changed but the general premise emerged.

Security tokens are real world assets. They are securities under present law, something that is fairly evident. We have stock, bonds, and real estate assets.

When we look at income tokens, these are yield based assets. The major portion of this comes from staking, something that was not evident in 2018. However, the fixed income market exceeds that of stocks, so it only made sense the yield seekers would be addressed.

The Path To $1 Quadrillion

According to RWA.xyz, the market cap of real world assets is $26.4 billion. This is a miniscule amount of what the eventual total will be. As stated, we are in the experimental phase, with Blackrock being the main innovator. It is a market that targets institutions, something the retail public is excluded from.

A bit larger number is seen in the market cap of crypto. This captures the traditional concept of cryptocurrency, including stablecoins. That now sits at $4 trillion.

Again, we are a long way from a quadrillion. That said, the path is pretty clear.

We have a few factors that will feed into this.

A) Institutions:

I long covered how Wall Street is hijacking crypto. We are seeing the emergence of a "hybrid" financial system where TradFi and DeFi merge. Traditional financial institutions are building out infrastructure that will provide services using blockchain yet have themselves as the gatekeepers.

Here is where big money rolls in. Nobody can dispute the financial power of these firms. There are tens of trillions in assets under management.

We also see massive development and creation of financial products. This is what Wall Street excels at.

Here is where a large percentage of the total will come from.

B) Smaller Ecosystems

Most watch the multi-billion (moving into trillion) dollar networks. This is what garners the headlines. The big players always have an outsized impact, something evidenced by Wall Street.

In crypto, thus far it is primarily Bitcoin and Ethereum. However, when we look at the history of the internet, we see a different story.

Sure, Amazon, Facebook, and Google are the dominant sites. That said, there are billions of websites that get clicks each day. The total amount of traffic is spread across the entire spectrum.

The advantage to crypto is anyone, anywhere in the world, can bring out a token. This can be associated with whatever it is tied to. Correlating it back to website, most will be nothing. There is the chance, however, that the next Facebook or Google emerges.

On top of that, we have the potential for 3rd and 4th tier penetration. While the market caps of these platforms will not reach trillions (or even billions), tens of millions is possible.

Here is where volume comes in. We are going to see millions of tokens with valuations in the millions. Individually they might not account for much against the whole but the totality will have an impact.

C) Agentic Age

Something that was not really foreseen in 2018, at least by the majority, is the concept of AI agents. A few in the industry might have realized this was a potential but the rest of us were in the dark about it.

That is no longer the case. It is clear we have a different model being developed where agents will take over the internet.

Essentially, we are looking at the automation of the economy.

Here is where things can get interesting. Agents will be tied to tokenization. This will come in the form of either a token directly representing the value generated by the agent (value capture) or agents as part of the platform, pushing value to the token representing that.

How big can this get?

Once again, we reach the point where the present forecast might be to look. This alone could push things over a quadrillion. If the economic singularity is something that is realized, the numbers will move beyond what most of us can comprehend.

In Conclusion

We are involved in something that is evolving quickly. If we look back 8 years, a lot has changed. I would say we are still in the embryotic stage of things. If we consider how long the present financial system took to develop, tokenization is but a baby.

The future financial and economic output are going to enter the quadrillions. Just like we saw a major leap forward due to the age of digitization, tokenization will likely top it.

That is the evolutionary nature of technology and money now falls under the tech sector.

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