Bitwise: A quadrillion-dollar market? Crypto is targeting this market size

By Matt Hougan, Chief Investment Officer, Bitwise; Compiled by Golden Finance. One of the biggest mistakes cryptocurrency skeptics make is underestimating the size of the market they aim to disrupt. This leads them to overlook things they should be taking seriously. For example: Bitcoin is a $2.3 trillion asset. People are often surprised when they hear this number. Few things in the world are worth $2.3 trillion, and most of them are household names. Amazon, for example, 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's entering a very large market. Gold is a $25 trillion asset, and Bitcoin is competing with it. This is crucial to its investment rationale. 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 trying to disrupt Amazon would need to capture 100% of the market, forcing the Seattle-based giant into bankruptcy. Good luck. But if the startup's goal is to disrupt gold, the situation is very different: to reach a $2.3 trillion valuation, it would only need to capture less than 10% of the market. Bitcoin isn't the only example. Blockchains like Ethereum and Solana are vying for control over the issuance, trading, and settlement of stablecoins and tokenized assets. These are massive markets. According to McKinsey, the global payments industry processes 3.4 trillion transactions annually, valued at $1.8 quadrillion. SIFMA and Savills estimate the combined value of stocks, bonds, and real estate at $665 trillion. Trillions? Quadrillions? These are among the world's largest addressable markets. These markets are so vast that no single, centralized company can even dream of capturing even a small portion. But Ethereum and Solana are different. As decentralized supercomputers of global scale, they have a real chance of capturing a significant share. That's why they're 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 attempting to raise funds at a $500 billion valuation. This would make Tether one of the world's most valuable startups, on par with OpenAI and SpaceX. On the one hand, this seems absurd. OpenAI is working to create general artificial intelligence, SpaceX wants to land humans on Mars, and Tether essentially operates a cryptocurrency market fund. But Tether is targeting a very large market. It holds nearly 100% of the stablecoin market in non-Western countries. It's possible that many emerging market countries will shift from primarily using their own national currencies to using USDT. If this happens, Tether could end up managing trillions of dollars in assets and earning all the interest.

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

This Should Change the Way You Invest

Knowing that cryptocurrencies are targeting a very large market changes several things.

First, it opened investors' eyes to the upside potential of cryptocurrencies.

These are among the largest and most important markets in the world. There's a world of difference between targeting Amazon and targeting the entire global payments market.

The second impact is that it made many investors want to diversify.

Investing in cryptocurrencies is like investing in early-stage startups: You're looking for black swans. If you find one, the potential returns are enormous.

But you have to expect that many of the projects you invest in will fail. Even the big ones.

Ethereum, Solana, Ripple, Aave, Hyperliquid, Chainlink: nearly every existing crypto project is likely to fail. In fact, I suspect the cryptocurrency sector will see more billion-dollar failures than any other industry in history. But I expect these failures to coexist alongside massive successes. (This is one reason I like the Bitwise Crypto Index Fund.) Diversification shifts the question from "Which crypto assets will succeed?" to "Will crypto be more important or less important five years from now?" If you have five minutes today, I encourage you to read Y Combinator founder Paul Graham's article "Black Swan Farming." It discusses the economics and strategies of investing in projects with huge potential. If you're investing in crypto, this is what you should be doing. Act accordingly.