There's More Money Than Ever in Cryptocurrencies, but What Does That Mean?

The total crypto market cap topped $3 trillion earlier this month. We put that number in context.

The crypto market cap -- the value of all the cryptocurrency tokens in circulation -- is currently sitting at $2.6 trillion, according to CoinMarketCap data. It tipped the $3 trillion mark on Nov. 9, but has since fallen again. To give some context, the market caps of Apple and Microsoft, the two biggest companies in the world, are roughly $2.5 trillion each.

But it's a bit misleading to compare a whole industry to a single company. Here are four ways to understand that figure.

1. Crypto is still a small percentage of global equity

According to Statistica, the total value of global equity trading worldwide was $37.69 trillion at the end of the second quarter of this year. At that point, crypto's market cap was about $1.4 trillion -- just 3.7% of that total.

For all the headlines and excitement around the crypto industry, it still only accounts for a small percentage of global equity.

2. Bitcoin accounts for more than a third of crypto's total market cap

Bitcoin (BTC), the first and largest cryptocurrency, has a market capitalization of around $1 trillion, which accounts for 38% of the whole industry.

While it's not realistic to compare the cryptocurrency industry to big companies, we can compare individual coins to similarly sized companies. Bitcoin's market cap puts it on a level with top-10 global companies like Tesla or Meta (Facebook).

3. There are now over 14,000 cryptocurrencies

According to CoinMarketCap, there are now over 14,000 available cryptocurrencies. Some of these are tiny and extremely difficult to find. Others are sizable businesses, attempting to solve real-world problems. That said, it's interesting to note the top 10 cryptocurrencies account for $2 trillion of the total market cap -- more than three-quarters of the total.

There are also 430 cryptocurrency exchanges, making it easier than ever to set up an account and trade. However, it's a good idea to stick to reputable exchanges that are licensed to operate where you live. That way, you're less likely to get caught up with scam exchanges.

4. The crypto market cap has grown 230% this year

At the start of this year, the total crypto market cap stood at $768 billion. Even taking into account the recent drop, it is still up over 230% since Jan. 1. Now, some coins have massively outperformed that -- for example, Solana's (SOL) price is up over 14,000%. But some coins have also failed. And others, like Squid Game (SQUID), turned out to be huge scams.

What’s next for crypto?

Even the staunchest crypto critics can't deny the incredible growth the cryptocurrency industry has seen this year. What that means for 2022 and beyond depends a lot on whether you see value in cryptocurrencies, and how blockchain technology might impact our lives.

For example, perhaps -- like many Bitcoin critics -- you believe cryptocurrency has no inherent value. If that's the case, the rise of cryptocurrency prices will only reinforce the view that this is a bubble that could eventually burst, leaving investors with nothing.

But you might think cryptocurrencies will be the medium of exchange of the future, or that they represent the next internet, and blockchain technology could be transformative. In that case, you may think the stats above are just the beginning -- and that 3.7% of global equity value is only the start.

Whichever side of the fence you fall on, one risk that shouldn't be underestimated is increased crypto regulation. Many governments worldwide have not yet released clear guidelines on how cryptocurrency will be regulated. As this becomes clearer, it will likely have a big impact on how the industry develops, for better or worse.

Keep it in perspective

When you see coins producing gains of over 5,000% in less than a year, it's understandable to want some exposure to the crypto industry. But given there are also significant risks to these investments, it's also important to balance that exposure with lower-risk investments.

Even with the extraordinary gains we've seen, cryptocurrencies still only account for a small fraction of the global economy. As an investor, that fact alone can help keep this new market in perspective.

It makes sense to ensure that cryptocurrency only makes up a small part of your overall investment portfolio. That way, if the crypto critics are correct and the market crashes to nothing, you'll minimize your losses. And if they're wrong, you'll still be able to reap rewards.