Cryptocurrency To 10X
We hear a lot of forecasts out there about what is going to take place. There is a lot of interest in cryptocurrency as things keep growing at in incredible pace.
Leading the charge is decentralized finance. This is an area that we saw huge growth over the past year and it is forecast to head higher.
DeFi at $800 Billion
Matthew Roszak, co-founder of the DeFi platform Vesper, believes that it could be an $800 billion industry in the next year. This is based upon the growth rate we are seeing.
Right now we’re sitting at a DeFi market cap of about $80 billion. My sense is that a year from now it will add a zero
With all the interest in what is taking place, this is not an outrageous forecast. In fact, we do see how he arrived at this numbers.
Here is a chart from Defipulse which monitors the total value locked (TVL) on the Ethereum blockchain.
As we can see from the notation, about this time last year, we saw $6.6 billion in TVL. Today that number is over $80 billion. That is more than a 10X gain.
Of course, that is no longer the only game in town. We can look at Defistation which monitors the TVL on the Binance Smart Chain and see another vault of money.
Here we see another $28 billion added to the total. Between the two, that puts it over $100 billion in TVL at this moment. The key with the BSC amount, that chain did not even exist a year ago. Hence, the total was from the start of this year.
Thus, we can see that, perhaps, the forecast put forth is possible underestimated. It is actually below what the growth rate was the past 12 months. The present $111 billion is a 16 times gain over the $6.6 billion locked up a year ago.
If we look at this aspect of the industry, we can see how a 10X gain in DeFi is actually a pullback from the pace that was set last year. Therefore, it is a realistic outcome for the next 12 months.
New Valuation Model
People find what is being put forth by the cryptocurrency industry hard to swallow. The numbers that are being espoused, especially long-term, truly have outsiders baffled. Simply put, they do not understand the new valuations that are taking place due to the expected network effects.
Let us take Bitcoin as an example. Many believe that it is in a bubble. Certainly none of us know what happens with short-to-near term moves. However, from a "bigger picture" perspective, Bitcoin is not close to bubble-land.
Even just using the concept of digital gold, this would give Bitcoin an upside of at least 10X. Many feel the store-of-value proposition is growing with Bitcoin, a point that is getting tougher to debate. This appears to be at least one niche that Bitcoin is filling.
The point that cryptocurrency and blockchain will be the foundation for the Metaverse and the end of scarcity are ideas put forth regularly here. It is to help people to see the massive upside transition that society is going to be making.
Alas, many still view things through the world as we know it.
Getting back to Bitcoin, does the fact that it is digital also add to its potential value. It much easier to use for transaction as compared to gold, the present store of value. We also see how portability is a major benefit, especially in a world where tyranny appears to be on the rise.
Because of this, would it be fair to put a higher valuation on Bitcoin as compared to gold if it does end up filling this role? It seems like it would be, thus pushing the upper end potential of Bitcoin higher than 10X.
Development Growing At A Much Greater Pace
What is happening in the markets is being dwarfed compared to what is being created by developers. The number of applications that are starting to roll out makes it impossible to keep up with.
We have games, NFT platforms, payment systems, and new wallets. There is Ethereum converting their entire blockchain to a PoS system. Cardano is rolling out. The list of projects under development is amazing.
Here is where most overlook the true potential of cryptocurrency. Do not look at it solely as a financial instrument. Instead, focus upon it being a technology. This means it has the ability to disrupt a great deal of the present system.
That is system is worth hundreds of trillions of dollars.
Another mistake people are making is to look at cryptocurrency as a different financial asset class. This is ultimately not going to be the case. What is going to happen is that every asset class will end up being cryptocurrency. This is what the tokenization of everything means.
Within 10 years, people will be buying stocks, bonds, real estate, collectible, and commodities in an entirely different way. Most anything with a contract today, like the futures market, will be tied to a smart contract on blockchain. Most of the others will be represented by either fungible or non-fungible tokens.
Technology Moving At More Than A 10X pace
Embracing the idea that cryptocurrency is a technology that is radically altering money and finance, we can see how it is part of a much larger trend.
There is little doubt we are in a technological age where we see the digitization process consuming many different industries. Software, processing, and our communication systems keep expanding. They are fast, cheaper, and can do more with each new iteration. This ends up providing massive gains over time, something we saw with computation during the last 30 years.
We also witnessed the impact of the Internet. It is amazing there are more than 5 billion people online. That said, we still have another 2.5 billion who are not. It took more than 30 years for us to get to this point. For the remainder of the population, roughly a third of the total, it might only take a few more years.
That is how fast things can go.
Presently, in cryptocurrency we see a lot of separation. This is typical in the early stages. In technology, the massive explosion tends to take place when convergence happens. This really sets the exponential trends in place.
The best example of this is the smart phone. That was the convergence of three separate technologies: mobile, computing, and Internet. When that occurred, adoption of the technology was record-setting. In under 7 years, the United States went from 0 to 70% adoption of smart phone technology.
Could we see something similar when DeFi, NFTs, and DAOs all start to merge. It stands to reason that we will experience something akin to the "smart phone moment". Of course, since all will be connected to the Internet at that time, it could be much larger. We also have to include the fact we are dealing with finance, which means it attract even more people.
So will we see cryptocurrency 10X? Looking at what is taking place, this could be a low estimate. Of course, we have to concentrate on the time period.
With Roszak's forecast, a 10X of DeFi in the next year seems reasonable. This, however, will not take place, without impacting the larger overall market.
For this reason, it will not be a surprise to see the entire cryptocurrency market 10X over the next year.
As always, this is not financial advice and anything written here is just for educational purposes.
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