In his latest report, the cryptocurrency data provider Coin Metrics predicted that the daily volume of Bitcoin could overshadow that of the U.S. stock market if growth rates continued.. But what is the probability really?
The report mentions Bitcoin as an asset class with incredible growth potential Due to its low trading volume compared to the more traditional markets:
“The interpretation is that Bitcoin in its current size is more comparable to a high capital base than to any other asset class.”
Could Bitcoin outperform the major asset classes?
The daily volume of the Bitcoin spot market is currently 4.1 billion US dollars in the US markets.., according to Coin Metrics; It is overshadowed by the global US equity, bond and currency markets with $ 446 billion, $ 893 billion and $ 1.98 trillion respectively.
Bitcoin volume compared to the main asset classes. Source: coin metrics
But Coin Metrics predicts an exponential increase in daily volume::
“However, if historical growth rates can be maintained, the current $ 4.3 billion daily Bitcoin volume in the spot markets would take less than four years to exceed the daily volume of all stocks in the United States. It takes less than five years of growth to exceed the daily volume of all US bonds. “
To achieve this, the current Bitcoin volume would have to be increased by more than 100 times the current Coin Metric number. exceeding the daily volume of US equities This also assumes that there will be no growth in the equity markets by 2024.
Bitcoin spot volume projection. Source: coin metrics
Although it seems a difficult task Coin Metrics believes that Bitcoin’s trading volume can not only exceed these important asset classes within five years, but also has the potential to reach $ 1 trillion. This would be incredible growth for a young and emerging market to surpass the one that has existed for over 200 years.
Breakdown of trade volume
The report looks at the difficulty of accurately measuring Bitcoin’s daily volume using various methods that lead to significantly different results.. The largest market by far is derivatives with a trading volume of USD 13.9 billion. However, this is still a developing market and is not included in the main analysis:
“If you believe in the reported volumes, it may be the most efficient to get involved through the derivatives markets. However, the crypto derivative markets are still evolving and market participants are faced with a confusing mix of different contract specifications. “
The reported $ 4.1 trillion trade volume comes from stable coins, dominated by Tether ($ 2.3 billion), Fiat markets ($ 1.2 billion), and exchange cryptocurrencies (USD 0.5 trillion).
Coin360 and CoinMarketCap report Bitcoin trading volumes of over $ 9 billion and over $ 25 billion This leads to confusion as to which number is the most accurate. However, the Coin Metrics data is based on volume in U.S. dollars.
Distribution of bitcoin volume through exchanges. Source: coin metrics
Coinbase, Bitstamp, Bitfinex and Kraken make up 90% of the reported daily volume of USD 500 million.
What does the future hold?
The second half of 2020 will be the definition of many analysts predicting the start of a bullish rise. Should the increase occur, not only will the trading volume increase, but new investors and institutions will also come onto the market, making an exponential increase 100 times more likely in the coming years.
But The approach could also shift from Bitcoin to other currencies as the novelty of an emerging financial market wears off and will be replaced by a more technology-oriented market.