The Crypto Market Cap Will Need To Be $100 Trillion By 2030
We entered a new era earlier. The total market cap of cryptocurrency, as monitored by Coingecko, crossed $3 trillion. This was the first time it did this and certainly is considered a milestone.
This is something that is very important for the future. We need to see this number keep growing at an accelerating pace. In other words, it is vital that the build out of this industry happen at a greater rate each year.
While most look at this as a way to enhance their wealth, since they view cryptocurrency like they do the stock market, there is an even bigger need. Quite simply, the money is going to be required.
Since money is a tool of collaboration, the rest of this decade is going to necessitate a lot of it. We are facing down a very power entity that cannot be avoided. For the present moment, it is hidden from most yet, by mid-decade will be evident.
Technological Era
Few would dispute we are in a technological era. This would be especially true for those who are involved in cryptocurrency since that, along with blockchain, is a technology.
Mainstream publications are filled with articles about autonomous driving, AI, robots, renewable energy, mixed reality, rockets, and global satellite. These are just a few of the technologies which will advance throughout this decade.
We also are seeing discussions about the impact of this on employment. Many are realizing that the push towards automation is increasing. Since the lockdowns due to COVID, companies selling warehouse robotic systems, RPAs, and in-store AI are reporting huge upticks in orders. Everything associated with these segments are seeing higher estimates sales forecasts through the middle of the decade.
For those who were paying attention, however, this is likely not something new. In the United States, the participation rate has declined over the last few decades. Even since the reopening, we see the workforce is seriously below where it was. In other words, we are a long way from full-employment which is one of the mandates of the Federal Reserve.
What is means is that a case could be made that the long-term impact of technology is being felt. The reduction in the workforce does not equate to the same in productivity. When we look at manufacturing output, we see the continued march to new highs.
This should come as no surprise. Technology allows us to do more with less. Simply look at an automobile manufacturing place in the 1960s and compare it to today. Back then, we saw a large plant employ 30,000 workers, operating 3 shifts. Now, most of the plant is robots with only a few thousand human workers.
The challenge is we are seeing this in the white collar world also. From the worker perspective, this is dangerous since it is moving at an even faster pace than what took place in manufacturing. After all, it is far easier to write a software program than deal with the dexterity issues of multiple robots operating on a line together.
We also know the impact of technology on personal items. Just think about what we use to spend money on yet are now basically free.
- Cameras
- Road Maps
- Music
- Video
- Long Distance Phone Service
- Stock Trading Fees
- GPS devices
- Music/Video Players
- Gaming Cartridges
- Camera Film
- Information
- Classified Ads
- File Storage
- Stamps
We also saw technological innovations such as Uber and Airbnb radically alter their specific industries. The rest of this decade will likely see radical advancements in construction, transportation, personal monitoring healthcare, and energy.
None of this works to increase prices.
More Money Is Needed
Quantitative Easing is a subject that is misunderstood by many, especially when it comes to the Federal Reserve. It seems counterintuitive to state more money is needed when the central bank is on its umpteenth round of QE. Yet that is exactly what happens.
The challenge is that the liabilities of the Federal Reserve are not legal tender. Thus, what is generated, even though part of the M2 calculation, does not operate in the economy. In fact, it is illegal for anyone other than depositing institutions to even have this on their balance sheets. At the same time, the asset is resident at the Fed even though it is on the commercial banks balance sheet.
Since the Federal Reserve has been easing for a fair portion of the last decade, it is no surprise to see this "money" explode. Here is what it looks like.
At the end of September, almost $4.2 trillion was on the depositing banks balance sheets yet housed at the Fed. This is money that cannot be used for salaries, do stock buybacks, or pay taxes. It is no wonder the Velocity Of Money continues to fall off a cliff.
In spite of the recent announcement that the Fed is tapering, it is unlikely this will be for long. To start, they are still easing which means the above chart will probably keep growing. Even if it contracts in the near-term, the medium horizon is going to see expansion.
The reason: technology.
Technology Breeds More Technology
Quite simply, the most valuable companies in the world are all technology related. When we view at the most list, we see the likes of Microsoft, Apple, Google, and Amazon. These companies invest large sums of money in R&D.
At the same time, we have tens of billions of Venture Capital money in Silicon Valley and Austin. We also see the same thing in cities such as Seoul and Tokyo. Globally, technology investment is exploding.
The challenge is that technology simply breeds more technology. This creates a continuous loop. As people spend more money on technology, these companies grow in size. Their ability to invest in R&D expands. Ultimately, more is brought to market as a result of all the money floating around. This drives down the prices of things over time.
As we progress forward, there is one other thing for certain: the technology beast is only going to get hungrier. We are not going to see this arena take a step backwards. In fact, during the pandemic, when the global economy collapsed, who benefitted? Technology companies
This is a cycle we saw often throughout the last 100 years. During times of economic contraction, those the most technologically advanced ended up profiting.
How much money is required? The United States, in one of the spending bills put forth $52 billion for semiconductor subsidies. While this is a lot of money, consider the fact that Intel and TSMC are spending $30 billion on the construction of 3 plants in the United States. This does not include other projects taking place around the world.
When we realize that currency is a tool for collaboration, it is easy to see with the numbers that technology requires, things get very big. We also can see how the will is not there to fund it all.
This is where cryptocurrency is going to have to step in. We are likely to see the need for $25-$40 trillion used by 2030 for the funding of technological projects. There will be massive opportunities for returns that investors are going to want to partake. However, it is going to require a great deal more liquidity than is being offered up.
Today, most are focus upon yield farming. By the end of the decade, we will see cryptocurrency used to fund rockets, fusion energy, build solar farms, study cancer, and advance our communication systems. This is a beast that will just keep growing.
In this era, more money equates to expansion of technology. For that reason, the market cap of cryptocurrency will need to be $100 trillion by 2030.
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