Stablecoins, Forks, and Thin Air–The Recipe To Expanding Market Cap?
January 23, 2019 by Paul de Havilland
Stablecoins, forks, and thin air seem to have replaced adoption and use as key ingredients in the market cap recipe for cryptocurrency. Despite a year-long 2018 bear market, crypto’s total capitalization is twelve percent higher than it was at the same time last year. How can that be?
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Stablecoins, Forks, and Thin Air
At the start of 2019, the global cryptocurrency market cap is ten times what it was two years ago. It is also twelve percent higher than it was at the start of 2018. But wait a minute… weren’t prices slapped around by the 2018 bear market?
While the industry-wide tumbling prices of cryptos sapped billions of dollars of value from the market, the new supply of coins has added value. Newly issued tokens account for $5 billion USD of that value. There were some 700 new digital assets created last year. That’s the thin air component.
An Increase in Token Supply Helped Boost Market Cap
The mining of new coins in circulation–in addition to the creation of new tokens and coins–has added a staggering $15 billion in value since the start of 2018. So while prices have fallen, the increased supply of cryptocurrencies has somewhat offset the impact on market cap. More bitcoin and ether have been mostly responsible for the impact of the increase in circulating supply, with mining activity of existing coins totaling $4.2 billion in increased supply.
But stablecoins, forks and the hype surrounding them has contributed markedly. If we add the Bitcoin SV fork to new bitcoin and ether supply, the market saw an additional $5 billion worth of crypto in supply. At press time, one Bitcoin SV, a currency that did not exist a year ago, was worth around $77, per CoinBillboard. Its total and circulating supply are equal, of course, at 17,477,861.
The Stable Weighs In
The first of the stablecoin, fork, and thin air ingredients in the recipe for the increase in supply represented the addition of $1.2 billion of supplied value from 2018 to 2019. Stablecoins, in many ways, were the story of 2018, with heavyweights like the Gemini and Poloniex exchanges (via Circle) weighing in.
What these figures actually illustrate, however, is the extent of the annihilation of value of the bear market. With twelve percent more value to consume, it swallowed that and more, with the crypto market cap plunging from $600 to 120 billion, despite the supply of new coins.
Stablecoins, forks, and thin air may have created $15 billion in new value since the start of 2018. But that has easily been consumed by the bearish drag on coin prices. A pinch of salt, then, might be required to complete the recipe.
Have your say. Do we need different metrics to measure the health of the crypto market?
Images via Pixabay
