These markets are so large that no single, centralized company dares to hope to capture even a small portion of them.

Written by: Matt Hougan, Chief Investment Officer of Bitwise

Translated by: Golden Finance

One of the biggest mistakes of cryptocurrency skeptics is underestimating the market size that cryptocurrencies aim to disrupt. This leads them to overlook some things that should be taken seriously.

For example: Bitcoin is a $2.3 trillion asset. People are often surprised when they hear this number. There are very few things in the world worth $2.3 trillion, and most of them are household names. For instance, Amazon is worth $2.3 trillion. But Amazon is a service that many people use every day, while Bitcoin is not.

So, why is Bitcoin worth $2.3 trillion? Because it is entering a very large market. Gold is a $25 trillion asset, and Bitcoin is competing with gold.

This is crucial to its investment logic.

Imagine you have two startups: one trying to disrupt Amazon and the other trying to disrupt gold. To be valued at $2.3 trillion, the company disrupting Amazon would need to capture 100% of the market, forcing the Seattle-based giant into bankruptcy. Good luck with that. But if the startup's goal is to disrupt gold, the situation is very different: to reach a $2.3 trillion valuation, it only needs to capture less than 10% of that market.

Bitcoin is not the only example.

Blockchains like Ethereum and Solana are vying for the issuance, trading, and settlement of stablecoins and tokenized assets. These are all huge markets. According to McKinsey, the global payments industry processes 3.4 trillion transactions annually, worth $18 trillion. According to estimates from SIFMA and First American, the total value of stocks, bonds, and real estate is $665 trillion.

Trillions? Tens of trillions? These are among the largest potential markets in the world.

These markets are so large that, in fact, no single, centralized company dares to hope to capture even a small portion of them. But Ethereum and Solana are different. As decentralized supercomputers with global scale, they truly have the opportunity to capture significant market share. This is why they are valued at approximately $500 billion and $100 billion, respectively.

Tether's Valuation

I was reminded of this phenomenon recently when news broke that stablecoin issuer Tether was trying to raise funds at a $500 billion valuation. This would make Tether one of the most valuable startups in the world, alongside OpenAI and SpaceX.

On one hand, this seems absurd. OpenAI is dedicated to creating general artificial intelligence, and SpaceX wants to land humans on Mars. Meanwhile, Tether essentially operates a digital currency market fund.

But Tether is targeting a very large market. It has nearly 100% market share in the stablecoin market in non-Western countries. It is possible that many emerging market countries will shift from primarily using their local currencies to using USDT. If this happens, Tether could ultimately manage trillions of dollars in assets and earn all the interest.

For context: In 2024, Saudi Aramco had the most profitable year in its history, earning $120 billion. At current interest rates, if Tether's asset size reaches $3 trillion—about 3% of the global money supply—its profits would exceed this figure, making it the most profitable company ever.

This Should Change Your Investment Approach

Understanding that cryptocurrencies are targeting very large markets will change a few things.

First, it gives investors a view of the upside potential of cryptocurrencies. These are among the largest and most important markets in the world. There is a world of difference between targeting Amazon and targeting the entire global payments market.

The second impact is that it encourages many investors to seek diversification.

Investing in cryptocurrencies is like investing in early-stage startups: you are looking for black swans. If you find one, the potential returns are enormous. But you must anticipate that many of the projects you invest in will fail. Even the big projects. Ethereum, Solana, Ripple, Aave, Hyperliquid, Chainlink: almost every existing crypto project could fail. In fact, I suspect that the number of billion-dollar failures in the cryptocurrency space will exceed that of any other industry in history.

But I expect that these failures will coexist with huge successes. (This is one of the reasons I like the Bitwise Crypto Index Fund.) Diversification shifts the question from "Which crypto asset will succeed?" to "Will cryptocurrency be more important or less important five years from now?"

If you have five minutes today, I encourage you to read the article "Black Swan Farming" by Paul Graham, the founder of Y Combinator. It discusses the economics and strategies of investing in projects with huge potential. If you are investing in cryptocurrencies, this is what you should be doing.

Please take action accordingly.

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