What would things look like with a cryptocurrency market capitalization of $31 trillion. Does this seem absurd to you?
Many are excited about the moves in Bitcoin. This is still the overwhelming leader in the space. However, that does not mean a lot of other things are not happening.
Over time, we get indications of where things are going. It is evident to most that crypto is getting a lot of favorable attention from the media these days. This stems from the fact that many of the winners during election season were pro-crypto. Early indications of the Trump administration is that it will beneficial to the industry.
That said, government support will not cause a 10x in the total market cap. Here is where we will take a look at how things could unfold and what it means.
Crypto: $31 Trillion Market Capitalization
As we can see from this chart from Coingecko, the present market cap of crypto is just over $3 trillion. This is the baseline from which we are going to work from.
Obviously, if the total market cap hit $31 trillion, that would be a 10x move. This is impressive no matter what the market.
Is it feasible?
There are a few different viewpoints out there.
Some believe it is not feasible since Bitcoin will always be the majority of the share of total market cap. That means BTC would have to be $15 trillion.
Another group feels that crypto is overhyped and that utility is found in stablecoins. Outside of Bitcoin, there isn't much.
I disagree with both of these premises. Before getting into that, let us look at the past.
One reason, from a chartist perspective, that a 10x move could be in the cards is due to the fact it happened before.
Here is the same chart as above with some annotations.
The first is the market cap on March 21, 2020. It was roughly $180 billion.
On November 6, 2021, we have $2.8 trillion
Naturally, we are dealing with more than a 10x move. However, this offsets the ability to selective choose the starting point, which was a bottom for that period.
In this instance, we are looking at a 10x move after a significant move up.
Is this possible?
The AI Explosion
A major part of my thesis is the idea that AI and cryptocurrency are intertwined. I think that, over time, this will become clear.
What we are seeing is some pieces of a foundation being laid.
AI requires data. It is a topic we covered a great deal over the past year. Since this is key, the democratization of data is going to be vital. Here is where crypto enters.
Blockchains perform this function well. Naturally, what kind of data can be stored varies depending upon the different chains. Hive, as an example, allows for any kind of text data whereas Bitcoin is mostly a ledger network.
As these database are filled with more data, the value increases. This is unlikely to be captured in the markets immediately. However, since networks require the native coin to write to the chain, this provides a feedback loop whereby purchases are needed. They are permissionless chains as long as one can pay the fees to write.
From this point, AI agents are going to provide compounding. Again, this is a topic well covered so no need for many details in this article.
What we can conclude is that developers (and average individuals as time passes) are going to built autonomous agents on these blockchains. These will provide a variety of services. As people utilize these, value increases. To start, more data is generated, providing another feedback loop. At the same time, people using agents means services are provided. That has value in the market. In fact, a case could be made that is what is lacking with Web 3.0 up to this point.
The core of this idea is the fact that AI agents are not going to use Visa to make payments. As we can see with simply writing to a chain, an agent will have to have the native currency to operate. What happens when there are millions of AI agents on blockchains?
We are heading for the agentic Internet, which means that data is crucial. We see this with Big Tech.
Basically, this is going to happen. The only question is where are the agents housed? Are they are centralized systems controlled by Meta, Google, and xAI or on decentralized networks?
Effect On Market Cap
Many speculate there is a lot of hype around AI. Perhaps there is.
However, if we look at the volume of traffic we see how things are exploding. Here is the data for OpenAI from Similiarweb.
It is the 94th ranked site in the world. This is a technology, at least to the general public, that is only 2 years old. We also have to keep in mind that, today, there are dozens of different text and image generators to choose from.
Naturally, OpenAi is a centralized system. Here is where Web 3.0 can enter the arena. Platforms are going to have to incorporate AI into them. Within a year or two, it will be akin to having video capabilities on a website. The idea of a site that is text only in 2024, especially where users interact, is absurd. I think we will see the same with AI features.
At this point, we can see how simply offering services that people will use is crucial. In this instance, AI services of which people have a stake in can be very appealing. Whatever progress is made with ChatGPT, Grok, Claude, or Llama, few of us have any financial stake in that. The growth of those ecosystems do not provide any wealth to us.
The same is not true for Web 3.0. Since these platforms (and networks) are tokenized, we can have stake. Thus, as the value grows due to our activity, which feeds the database, we financially benefit. Then we are simply dealing with the process of generating an increasing number of network effects.
Our final thought here is the pace of AI development. We can see the massive potential simply due to the pace of innovation. Look at anything from a year ago and see how much things change. Image generators are light years ahead of where they were. Hallucinations are still an issue but less than when ChatGPT 3.0 rolled out. We are also watching the development of new services such as AI search.
Crypto is going to be able to ride this wave.
As stated, my theory is that crypto and AI cannot be separated.