What is the DeLorean Method?
We need to discover the implications of market capitalization for ourselves. I didn't pay a whole lot of attention to market cap in the past. Those numbers often seem too large to have any applicable context to my individual consumer scale of economics. What is the relative upside price potential of a cryptocurrency or stock with a market cap of $100 Million? How about $1 Billion... or $1 Trillion? We can't conceptualize of these large values unless we have some greater context.
We need to define the macro boundaries of all markets. The DeLorean Method is a tool I'm developing for finding value in any market based upon understanding and evaluation of "meta market capitalization". #MetaMarketCap refers to the market capitalization of all money in existence. If we can define this upper bound approximately, it provides us greater context with which to evaluate opportunities in all markets. I rely upon information from three primary sources to inform my understanding of #MetaMarketCap (FiatMarketCap.com, CoinMarketCap.com, and CompaniesMarketCap.com). Used separately and specifically, these resources can provide us with incredible market insights. However, using the #DeLoreanMethod, we're able to aggregate the macro data from these three sources to identify an approximate short-term growth multiplier ceiling for specific assets without any knowledge of their present price or supply. Here are the 3 primary #MetaMarketCap data points which define the macro allocation of the world's wealth:
1. Market Capitalization of all fiat currencies (~$120 Trillion)
2. Market Capitalization of all stocks (~$90 Trillion)
3. Market Capitalization of all cryptocurrencies (~$2 Trillion)
It doesn't seem right to me that the market cap of all stocks accounts for 75% of the market cap of all fiat currencies. I know there are commodities, precious metals, and derivatives markets that are probably not accounted for here as well. Is this much of the world's wealth tied up in corporate stocks? I feel certain that I'm overlooking something here, so please comment if you detect gaps in my reasoning. I'm pretty certain now that we're talking about a market cap of ~$120 Trillion USD valuation of all fiat currencies, PLUS an additional ~$90 Trillion USD valuation of all stocks, PLUS a ~$2 Trillion USD valuation of all cryptocurrencies. I still need to confirm this, and the #DeLoreanMethod is still a working model with many limitations. However, it seems like we're in the vicinity of ~$212 Trillion USD market cap between these three market classes. I could be way off, so I invite you're comments in the discussion below. Alright, now let's take a look at the market cap and role of stablecoins and then we'll return to each of these 3 primary components of #MetaMarketCap for applying the #DeLoreanMethod.
The Market Cap of Stable Coins
I originally wrote about the first tool FiatMarketCap.com in a recent post, Global Fiat Market Cap is Worth $117 Trillion USD. Bitcoin Still Under 1% of Global Money Supply. #StartTheDeLorean. That post shows how I arrived at the ~$117 Trillion USD figure. I discuss the inevitable minting of inflationary Fed Coins. As the market capitalization of the aggregate cryptocurrency economy grows, so will the market capitalization of stablecoins pegged to $1 USD. The first US Dollar-pegged stablecoin, Tether (USDT), already has a market cap of $44.5 Billion.
If we take a quick look at a handful of the top stablecoins by market capitalization, we can see that 5 of the top 100 cryptocurrencies by market cap are stablecoins with market cap over $1 Billion. USDT is the clear leader, but USDC, BUSD, DAI, & UST add an additional $21 Billion in stablecoin market cap. There's probably another billion of so split between the remaining lower-cap stablecoins that I haven't mentioned... like Gemini's GUSD or USDJ on the Tron Network with a market cap of ~$300 Million. But you'd have to find it on TronScan.org to know that (Learn how I discovered DeFi on Tron Network here).
In addition to the screen captures above, I'm also including the live Coingecko tickers for these top 5 stablecoins below so that future readers will be able to see the change in the stablecoin market cap over time.
Fed Coins, Stable Coins, & Fiat Market Cap
There is a total market capitalization of ~$67 Billion USD in blockchain stablecoins pegged to $1 US Dollar. As that market cap continues to increase, it puts pressure on the central banks across the world to mint their own " Fed Coin" stablecoins. It's also a possibility that central banks will attempt to pass regulations prohibiting the use of existing stablecoins, but we'll save that for another day. I raised the issue of cryptocurrency stablecoins and cryptocurrency Fed Coins prior to reviewing the Fiat Market Cap list below, because I want you to understand the relationship between stablecoins and fiat currencies in their larger context. The value of all fiat US Dollars is only ~$20 Trillion. So the value of all cryptocurrency stablecoins at ~$67 Billion is already 0.3% of all US Dollars. It's not yet very threatening to the central banks, but I imagine it's starting to become a concern as the cumulative stablecoin market cap begins to approach 1% of all US Dollars. Now we have an understanding of the volume of US Dollars, and the value of all cryptocurrency stablecoins pegged to the US Dollar.
Market Capitalization of all fiat currencies (~$120 Trillion)
FiatMarketCap.com shows the total fiat market cap expressed in Bitcoin value as ~1.97 Billion BTC. With the present BTC value of $59,537, the global fiat market cap can also be expressed as ~$117.3 Trillion USD. BTC Dominance relative to the global fiat market cap is 0.95%. These are key #MetaMarketCap observations which define the scale of the markets so that we can apply the #DeLoreanMethod to find value and growth potential.
When I turn my attention to the FiatMarkepCap list of the world's currencies, I notice that it includes Bitcoin for reference. There it is at #14. This list doesn't include any other cryptocurrencies. It's just the world's fiat currencies expressed in BTC value. Fiat Market Cap seems to have included BTC in the list as a point of reference. How long do you think it will be before BTC climbs the list and supplants the US Dollar and the Chinese Yuan? I think it could happen before 2021 is over, but I feel certain that it will happen within 5-10 years. It would only require Bitcoin to have a 30x (3,000%) gain to a price of about $1.8 Million per BTC. Don't forget that the pressure for this move is coming from both directions... Bitcoin is gaining value while fiat currencies are being rapidly devalued. Bitcoin has a fixed limited supply and fiat currencies have unlimited inflationary supplies. Moreover, consider the present and future impact of COVID-19 on the global economy. The world's fiat "printing presses" have been running like never before... and that's really saying something. So the stablecoin market cap represents ~0.3% of all fiat USD. Bitcoin's market cap represents ~1.0% of all fiat currency. And the market cap of all crypto represents ~2% of all fiat currency. These are the critical components of the #DeLoreanMethod.
Market Capitalization of all stocks (~$90 Trillion)
As I have become hyper-aware of the utility of understanding meta market capitalization (read my thoughts on market cap and the "Secret Sauce"), I've been looking-up the market cap of everything. I started poking around on yahoo finance to get a sense of the market cap of various stocks I'm somewhat familiar with. I had just recently written this post about VeChain ($VET) and SalesForce ($CRM) teaming up and how "blockchain as a service" ia entering the large cap stock sector. I was shocked to find the market cap of SalesForce ($CRM) is $213 Billion! I checked a few other stocks and began wondering if there was a market cap resource for stocks similar to Coinmarketcap.com or Fiatmarketcap.com. I was very pleased to discover CompaniesMarketCap.com. It also gave me a whole new perspective on the potential for the cryptocurrency economy to reach incredible new heights in the years to come.
I didn't realize that Apple had a market cap of $2.23 Trillion. That's insane! If I did hear that figure in the past, it didn't mean much to me because I didn't have greater context. In my opinion, Bitcoin alone should reach a market cap of at least 10 times the largest stock. So that means that Bitcoin's market cap could go to $22 Trillion. I think this should certainly have happened by the time that the last whole Bitcoin has been mined (when there is less than a single BTC left to find). As there are eventually only a few thousand Bitcoin left to mine and then eventually only a fractional Bitcoin left to mine... the mining difficulty and Bitcoin price will be at parabolic all time highs. With a fully saturated total supply of 21 Million Bitcoin, a market cap of $22 Trillion would equate to a price of $1,047,619 per BTC. This is interesting to see now, because I recently made the case for a $1 Million BTC price by 2050. Now I'm thinking $1 Million BTC might arrive a whole lot sooner.
Seeing that the world's top 5 companies have market caps between $1.5-$2.23 Trillion really informed my perspective. Cryptocurrency really is just getting started. Blockchain technology is going to fundamentally change everything about the way in which companies store and share data. So all of these companies on CompaniesMarketCap.com (with a cumulative market cap of $88.65 Trillion) are now inevitably the potential future customers of blockchain as a service providers. In light of this understanding, I'm beginning to see the potential for VeChain's market capitalization alone to reach $1 Trillion. In the medium-term time horizon (5-10 years from now), Coinbase stock ($COIN) certainly has the potential to reach the $1 Trillion dollar market cap as well. I'm excited about buying some of their stock next week (as soon as I can figure out how to do that). I'm working on a post about the upcoming Coinbase stock offering, and I'm realizing that it seems inevitable that Coinbase stock will reach into the Trillion dollar market cap range eventually.
I wasn't aware that there were over 350 stocks with market cap in excess of $50 Billion. Compare that to only 4 cryptocurrencies with a market cap greater than $50 Billion USD. That makes me really hopeful for the future of crypto. But I had to keep looking comparatively at the crypto market compared to the stock market. How many coins and stocks have a market cap in excess of $1 Billion?
There are 3,692 stocks with market cap greater than (or equal to) $1 Billion USD. Compare that to just 212 cryptocurrencies with a market cap greater than $1 Billion USD. The comparative macro market analysis is very informative. I think of this Meta Market Cap analysis as a way to quantify my market instincts. The information alone isn't very actionable. I requires that you apply your own particular market sentiment to the method. The method itself is really about equipping investors for conceptualizing and strategizing from the big picture perspective.
Market Capitalization of all cryptocurrencies (~$2 Trillion)
Now that we've explored the fiat market cap and the stock market cap, we can return to the cryptocurrency market cap with much greater context and perspective. We will be leveraging this understanding of meta market cap in order to construct short-term percentage growth ceilings (see examples of how I do this here). This is what I'm referring to as the "DeLorean Method". It's not quite a time machine without a flux capacitor, but it has potential... that's why it's just the "DeLorean Method" right now, instead of the "Time Machine Method". However, I am working on a plan for Flux Capacitor Hyper Growth. Follow-along for the ride for the chance to catch a glimpse of the future.
When I return to CoinMarketCap.com with this newfound understanding of #MetaMarketCap, I can research new tokens and hunt for deep value by using the sort by market cap feature. By definition, market capitalization fluctuates with price, so these numbers are constantly in flux. That's partially why it's helpful to have a heuristic, like the #DeLoreanMethod, for narrowing the list of all possible investments to gain a better chance of meeting a specific cryptocurrency or stock investment goal. We're taking a snapshot of all market caps in order to construct an informed estimate of the percentage growth ceiling of specific assets based on their current market cap. The first thing I want to know when I'm considering a possible stock, cryptocurrency coin, or token investment is the short-term percentage growth potential. That's what investors, like me, are looking for. I consider 3-5 years to be a fairly short time horizon and hopefully reduces our margin of error as well. Here's a look at my 3-5 year percentage growth ceiling projections divided into 4 tiers and their respective "growth ceiling multiplier".
I mentioned above that the market cap of Bitcoin is ~$1 Trillion. I've also discussed in a previous post, Global Fiat Market Cap is Worth $117 Trillion USD. Bitcoin Still Under 1% of Global Money Supply. #StartTheDeLorean, that the market cap of all of cryptocurrencies combined is only another ~$1 Trillion. So the entire cryptocurrency market capitalization is only ~$2 Trillion. Given the fiat market cap and the stock market cap (even with my incomplete understanding of their relationship), I see enormous potential for the cryptocurrency market ahead... but also enormous potential for conventional stocks issued by blockchain companies, like Coinbase ($COIN). I don't feel the need to dig quite as deep into the Tier 1 micro market cap range (between $5-$50 Million) anymore. I'm still looking for the deepest value there. However, I'm also realizing that medium term (5-10 years) percentage growth ceilings of Tiers 2-4 are going to be pretty similar to the short term (3-5 years) percentage growth ceiling of Tier 1. So, if I'm not in a big hurry to reach my goals, it may be wiser to focus on Tiers 2-4.
This decision is largely a matter of how much time one has for market research. I just wrote a post about using the #DeLoreanMethod to sift through the 644 coins in Tier 1. That's a lot of micro-cap projects to sort through. It took me several hours just to reacquaint myself with the 54 Tier 1 coins I "sort-of" recognized. I'm dreading part III... where I'm going to cover the remaining 590 Tier 1 coins with a very broad brush. I'll highlight a few projects of interest that I discover there, but it's going to take me some time to pan that gold. I've taken a quick look at the present distribution of projects/coins based on the 4 Tiers of the #DeLoreanMethod. Just to give you some perspective, there are 633 coins in the lowest market cap range (down from 644 last week). There are less than 450 coins split between the remaining 3 Tiers. I will take me less time to examine all of the projects within Tiers 2, 3, and 4, than to get through all of the Tier 1 coins.
Now consider the potential for many cryptocurrencies to reach a market capitalization in excess of $50 Billion. Recall that $50 Billion is the market cap target we're using for our 3-5 year Growth Ceiling Multipler GC(x) projections. Remember there are 3,692 stocks with a market cap greater than $1 Billion USD. By comparison, there are only 212 cryptocurrencies with a market cap greater than $1 Billion USD. So there are 17.4 times more stocks with market cap >$1 Bil, than there are cryptocurrencies with market cap >$1 Bil.
Remember there are 352 stocks with a market cap greater than $50 Billion USD. In contrast, there are only 4 cryptocurrencies with a market cap greater than $50 Billion USD. So there are 88 times more stocks with market cap >$50 Bil, than there are cryptocurrencies with market cap >$50 Bil. Our Meta Market Cap analysis is showing great potential for mid and low cap cryptocurrency market growth in the next 3-5 years.
See You In The Future
All of this can sound a bit wordy.... Basically, in order to more accurately project a GC[x] (Growth Ceiling Multiplier) for a specific coin, we need to know how much money exists, how much of it is in these various markets, and the present market cap of the coin in question. We can partially ascertain the potential for an asset to increase in value and market capitalization based upon a comparison of its current market cap with the highest market capitalization of projects in the same sectors. From there, we can project the GC[x] (growth ceiling multiplier) based upon our view of the larger trend of cryptocurrency to fiat dominance. These are the steps I'm using to identify value in the market. Hop in my DeLorean and let's see how far we can look into the future. That's what #MetaMarketCap and #DeLoreanMethod are all about.
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