In the first part of our series on the topic of market capitalization, we have explained how the market capitalization is calculated, what it means and how to evaluate it. In the next step, we have introduced the alternative measure of the “Net Inflow”, and its importance explained. In today’s part 2 of the series on the topic, it should be a matter of whether it can be determined how much the capital is, so far, gone really in the crypto currency market and what conclusions can be drawn from it.
In the first part of the series, we have found that “real” has gone into the crypto market is much less capital than the market capitalization suggests. The money is flowing, only then in the market, when an Investor buys a currency by Fiat currency paid (Net Inflow). The main reason for the difference between market capitalization and Net Inflow is the that most circulating Coins were bought at a much lower price.
How high is the Net Inflow is in the crypto currency market?
First of all: A proven and measurable number to the Net Inflow. If you search the Internet, you find only a single study of this topic. This was published in December 2017, of JP Morgan, and comes from the time when the total market capitalization was approximately $ 300 billion. Unfortunately, the study itself is not publicly accessible, or found in the Internet. As a source, only one article of the news website zerohedge from the beginning of December 2017 is therefore used.
At the time of the study, the Net Inflow at around US $ 6 billion and only 2 percent of the total market capitalization located! Whether this number is actually true, can not be verified. The necessary Figures are not collected.
JP Morgan has based its calculation of the Net Inflow on the annual Change in the Total Supply of Bitcoin and Ethereum, multiplied by the average annual price for a BTC or ETH. In the result, the following graph is created. (The Numbers on the X-axis the years 2009 – 2017, and the Y-axis represents the Net Inflow in millions of USD.)
The cumulative totals since 2009 to around $ 6 billion, according to the estimate of about 4.2 billion USD on Bitcoin and the Rest are about Ethereum in the cryptocurrency market has. The extent to which “direct purchases” of other crypto-currencies have played (especially in 2017), was not investigated.
If JP Morgan is out with its estimate is correct, the implications are overwhelming: Contrary to the expectation that the market capitalization of Bitcoin and Ethereum is a rough Reflection of capital inflows in the crypto currency market, there is a big difference. Only 2 percent of the total market capitalization could be paid to capital in the crypto currency market.
As in the first part of the series emphasized, it is therefore in our view essential to an understanding of the difference between the concept of market capitalization and the Net Inflow to events in the market can be properly assessed.
The value should be correct, this shows in our view that the crypto-currency market is still in its infancy. The 6-billion-U.S.-Dollar Net Inflow for crypto-currencies (since 2009), inflows in relation to Net in 2017 for equity funds / ETFs (281 billion USD), pension funds (346 billion USD), global money markets/ USA (145 billion USD) and commodities (8.6 billion USD), only a small fraction of the global capital flow.
As soon as new capital, particularly from institutional investors is flowing into the crypto currency market, could be the previous rate increases are only the beginning. Also, further regulatory measures are probably required, in order to give the institutions a legal framework. In this respect, is, and remains, 2018 is highly likely to be an interesting year for the cryptocurrency market.
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