Cryptocurrency market cap hits $1.8 trillion in May 2021, future adoption expedited through new customer offerings by Microsoft, Amazon, VISA, Mastercard, global investment banks and Miami city. DeFi crypto market cap estimated at $110 billion.
Key takeaways
- Visa & Mastercard a combined user base of over 4 billion offer crypto as an option for payment.
- Global investment banks clients demand access to cryptocurrencies.
- Tech giant Microsoft offers its 245 million daily active users option to purchase in crypto.
- Miami adopts cryptocurrency in treasury reserves.
- DeFi, which offers ETH holders to borrow, lend and earn interest through leading protocols such as Aave and Compound, grows to an estimated market cap $110 billion market in April 2021.
Crypto Market capitalisation grows from 400 billion to $1.8 trillion fuelled by bitcoins rapid growth.
According to data from Coinmarketcap.com, cryptocurrency market capitalization reached an all-time high of $2 trillion dollars in early April this year, and as of today stands at $1.8 trillion. This compares to a market cap of $800 billion in 2018. However, in the years following, market capitalization dropped and fluctuated under the $400 billion dollar mark, falling as low as $100 billion. This trend continued until the end of 2020, where late in the year there was a steep incline in growth of the market, and the industry quickly hit the $2 trillion mark in April 2021. This rise was predominately due to a substantial rise in Bitcoins value from $250 billion market cap in October, 2020 to $1T, first in February 2021 and again in March 2021. At the time of writing the Bitcoin market cap stood at $720billion. Whilst Bitcoin has seen high volatility with its prices over the years, there is still acknowledgement of its sizeable feat in reaching the $1 trillion mark in just 12 years of existence. An achievement that took Microsoft and Apple 44 and 42 years to attain, and Amazon and Google, 24 and 21 years.
Cryptocurrencies goes mainstream in 2021, a catalyst for user growth.
Evidence of cryptocurrencies becoming mainstream is highlighted by its application across a myriad of sectors from gaming, travel, retailers and restaurants. Forms of payment differ among the sector or individual companies, where payment can be transferred via Bitpay and Coinbase or direct transfer.
A landmark move by tech giant Microsoft’s decision to adopt cryptocurrency as a means of payment for its hundreds of millions of daily active users across its suite of products which include Microsoft 365, OneDrive and Skype is a landmark move. In April 2021, Statista recorded 70 million wallet users worldwide, this compares to Microsoft user base of 145 million daily active users for Microsoft Teams and 100 million daily active users for Xbox live alone. Indicating that the usage and adoption of cryptocurrency has the potential to more than double just through Microsofts offering. Amazon has also joined the crypto train by offering Bitcoin payments for its live stream service Twitch, which focuses on live video game streaming and has 15 million daily active users and over 27,000 partner channels.
Travel industry, a $396 billion industry, starts to see providers offer crypto as a means of payments for bookings.
Naming a few in the travel industry, airBlatic, Flight Centre, and some jet and yachting companies such as PrivateFly, JetFinder, The Yacht Break and the online travel agency Expedia.
Shopify, a reach of 44 million customers through its merchants in 2020 accepts cryptocurrency gift cards.
Shopify, a marketplace payments network, in which any merchant that operates via a Shopify store allows use of cryptocurrency. And although not a direct transaction of cryptocurrency, many retailers, services, restaurants and online shops will accept Bitpay Gift Cards, gift cards that are purchased with cryptocurrency.
Major payment gateways VISA and Mastercard, a combined user base of over 4 billion, accept cryptocurrency as a form of payment.
In line with the recent rise of cryptocurrency, many payment settlers, banks and retailers are acknowledging the widespread growth and prevalence of virtual currencies and are adopting them into their services. Both VISA and MasterCard have announced they will support select cryptocurrencies directly, without the added step of behind the scene conversion of crypto to fiat currency. Being aware that there is an undeniable demand for cryptocurrency, the two payment settlers want to build on existing customer relationships and loyalty. They aim to ease transactions for customers, merchants and businesses, and bridge the gap between fiat and virtual currency.
Global investment bank clients demand access to cryptocurrencies.
Within the banking industry, Goldman Sachs recently reintroduced its crypto trading desk to clients of a private wealth management group after observing high institutional demand for crypto assets. Morgan Stanley also moved to accept Bitcoin as an asset class after wealth management clients demanded access. However, this will be limited to clients with a minimum asset account of $2million, to account for the volatility and risk of Bitcoin.
Miami adopts cryptocurrency in treasury reserves.
Francis Suarez, the Mayor of Miami, has also expressed his interest in cryptocurrency. He discussed the potential of putting some of Miami’s treasury reserves in Bitcoin and the numerous ways crypto can be integrated. Including, making payments in Bitcoin and allowing payment of taxes and fees to the city in crypto. Beyond cryptocurrency, during a podcast with Cryptex founders Preston Van Loon and Joe Sticco, Francis Suarez also discussed the Ethereum ecosystem. Ethereum (ETH) is another recognised and upcoming cryptocurrency. Following Bitcoin, Ethereum is the second largest crypto platform, dominating 18.2% of the cryptocurrency market cap. Introduced in 2015, what sets Ethereum apart from Bitcoin, is the open source blockchain software technology it is built on. As this blockchain network is open source and interoperable, any developer is able to build decentralised applications (DApps) and run smart contracts tailored to their preference. In the podcast, Francis Suaresz, outlined how the Ethereum ecosystem can in fact help create jobs in Miami, and how these decentralised systems would benefit the city. As an example, the Ethereum platform could be used to transfer title records for real estate.
Decentralised finance, an estimated $110 billion market cap.
The versatility of blockchain technology can be seen in the recent introduction of the Decentralised Finance (DeFi) sector. DeFi is a platform where traditional financial services are executed by financial smart contracts, protocols and decentralised applications that have been developed via blockchain. In which, most DeFi programmes are developed via the Ethereum network.
According to defipulse.com the Total Value Locked (USD) in DeFi is currently $70.6B (TVL is calculated by multiplying the total balance of Ether (ETH) and ERC-20 tokens held in smart contracts by their price in USD), Coinmarketcap.com has also estimated that DeFi crypto market cap is $118.9B. DeFi is a new and decentralised way for crypto holders to carry out various financial activities. A key feature for the DeFi platform is the direct peer-to-peer financial protocols and smart contracts, that cut out intermediaries like banks. One of the most popular platforms on DeFi are borrowing and lending services. Ethereum-based Aave and Compound, being the most well-known, are such protocols that allow crypto holders to borrow assets and earn interest on deposits. Other popular applications include decentralised exchanges (DEX). DEXs allow trading of both crypto and fiat currencies, where currency is held in smart contracts until predetermined and programmed conditions of smart contracts are met. Examples include Synthetix, also built on Ethereum, a derivatives liquidity protocol, that acts as a decentralised exchange (DEX) and also an issuer of assets. As well as Uniswap, another DEX built on Ethereum, an automated liquidity pool. Addressing the instability of cryptocurrency, stablecoins have been introduced into the market, where varying cryptocurrencies are tied to an asset outside of the cryptocurrency (for example the dollar or euro) to stabilize the price.
Authors
Georgia Jodlowski
Researcher at Pangea Ultima
&
Sonya Kapur
Economist and founder of Pangea Ultima
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Sources
https://www.digitalinformationworld.com/2021/04/bitcoin-has-reached-1-trillion-mark.html
https://fortune.com/2021/03/29/visa-crypto-business/ https://www.mastercard.com/news/perspectives/2021/why-mastercard-is-bringing-crypto-onto-our-network/
https://www.cnbc.com/2021/03/17/bitcoin-morgan-stanley-is-the-first-big-us-bank-to-offer-wealthy-clients-access-to-bitcoin-funds.html, https://www.finextra.com/newsarticle/37623/goldman-sachs-to-re-open-crypto-desk-as-institutional-demand-surges
Note: References are as at the 19th May 2021