This article was written exclusively for Investing.com
- Only 99 tokens are in the billion-dollar market cap club
- Greenspan would say ‘irrational exuberance;' Munger says ‘disgusting'
- BAKE: a billionaire
- RVV: also a billionaire
- Only invest spare cash—this bubble could pop
The digital currency asset class is now a market that stands at the $2.08 trillion level, after reaching a new high at over $2.4 trillion. The aggregate value of the market moved to a level greater than the valuation of any one company that trades on the stock market as it surpassed Apple’s $2.107 trillion level.
Hard work tends to be the route to building wealth for most of us who are not fortunate enough to receive substantial inheritances. But human nature drives most people to seek riches without putting in the time and effort. Easy money has a strong magnetic effect on our collective psyches.
The latest route to sudden wealth has been via the cryptocurrency asset class. A $100 investment in in 2010 at five cents per token was worth more than $13 million at the recent high of over $65,500 per coin. A $1000 purchase in 2015 at 55 cents was worth over $7.7 million at the recent $4240.25 high.
With over 9,700 tokens trading, many investors and traders are looking for the next Bitcoin or Ether to make them rich via an initial small investment.
The most liquid tokens now have market caps of over $1 billion. However, they represent a small percentage of the overall market, which expands daily.
BakeryToken () and Ravencoin () are members of the billion-dollar market cap club and are in the top tier of the asset class.
Only 99 tokens are in the billion-dollar market cap club
According to CoinMarketCap, only 99 tokens out of 9,908 had market caps above the $1 billion level. At just under 1%, many of the other over 9,900 coins will fade into a cyber cloud abyss over the coming months and years. Most will probably wind up as dust collectors in computer wallets.
However, that will not stop the short-term speculation that has gripped the asset class.
I don't know many people who would not risk $1, $10, $100, or even $1000 to make millions. The initial investment risk in those cases is defined.
With Bitcoin and Ethereum as models, the right choice and a little luck could turn the small investment into a fortune. But rewards in any market are always a function of risk. As such, many small crypto investments will most likely turn into cyber dust.
When it comes to trading in the digital currency world, liquidity is a critical factor for success. The most liquid tokens allow traders to execute buy and sell orders on a reasonably tight spread.
The asset class’s liquidity is growing with its overall market cap, with the most liquidity concentrated in the top-tier tokens. Those with market caps over the $1 billion level have established track records, to some degree. However, if the asset class is in a bubble, as some believe, all token values are at risk.
Greenspan would say ‘Irrational exuberance;' Munger says ‘disgusting'
In a 1996 speech, then Fed Chairman Alan Greenspan characterized the burgeoning internet stock market bubble as “irrational exuberance.” It took a few years, from March 2000 until the low in October 2002, until the internet bubble burst.
At a recent press conference, Warren Buffet’s Berkshire Hathaway (NYSE:) partner Charlie Munger called the price action in cryptocurrencies “disgusting and contrary to the interests of civilization.” A few years before that recent statement, Warren Buffett called Bitcoin, financial “rat poison squared.”
The 97-year-old Munger doubled or even tripled down on his business partner’s characterization of cryptos as the market continues to experience extreme growth. In past statements, Munger had said:
“Bitcoin reminds me of what Oscar Wilde said about fox hunting. He said it was the pursuit of the uneatable by the unspeakable.”
Time will tell if cryptocurrencies are a fad that will fade or an evolutionary Fintech revolution where blockchain and the leading cryptocurrencies become a mainstream means of exchange and investment assets.
A younger generation and many middle-aged investors and traders have become hypnotized by the potential for incredible financial rewards. Greed is a powerful impulse.
BAKE: a billionaire
A BakeryToken is a native BEP-20 governance token on the platform. BEP-20 is a token standard on Binance Smart Chain that extends ERC-20, the most common Ethereum token standard. The standards are blueprints that define how tokens can be spent, who can spend them, and the rules for using them.
BAKE users can earn BAKE tokens by providing liquidity on BakerySwap. Holding BAKE tokens allows for the use of tokens for governance voting and earning transaction fee dividends. BakerySwap’s website is available via this link.
As of May 18, BAKE had a market cap of $1.244 billion at $6.53 per token.
Source, all charts: CoinMarketCap
The chart shows that since September 2020, BAKE has been as low as below one penny in late October and early November and as high as just over $8 in early May. BAKE has provided some sweet returns for investors who bought below one cent and sold at the $8 level. A $100 investment rose to over $80,000 in seven months.
At the $6.53 level per token, BAKE was a member of the crypto billionaire club as of May 18 and was the ninety-second leading token. Since yesterday's Bitcoin selloff, the entire asset class has shifted lower, but BAKE remains above the $4.50 per token level with its market cap hovering just below one billion.
RVV: also a billionaire
Ravencoin is a digital P2P (peer-to-peer) network that transfers value from one person to another. RVV is a “fork” of Bitcoin, allowing token creation on its’ own blockchain. RVV is totally open source, launched in January 2018, with no initial coin offering (ICO).
A fork is what happens when a blockchain diverges into two potential paths going forward. Bitcoin forks are splits in a transaction based on different user opinions about transaction history.
When Bitcoin forks, a new token results with a new network. Ravencoins’s website highlights the protocol.
As of May 18, RVV had a $1.143 billion market cap at the $0.1303 per token level. It time of publication it's trading at just under $0.098, with its market cap now below the $1 billion level.
The chart shows that RVV tokens traded as low as just over one cent and as high as 23.60 cents since March 2018. At the 15.50 cents level on May 18, the market cap of $1.366 billion made RVV the eighty-ninth leading cryptocurrency. While a $100 investment at 1.2 cents in 2018 would have only yielded a profit of around $1966 at the 23.6 cents high in 2021, it is still a significant gain on a percentage basis.
Only invest spare cash—this bubble could pop
Bulls can make money, bears can make money, but pigs usually wind up slaughtered. That old adage may not apply today to many of the cryptocurrency millionaires and billionaires, but the jury is still out on if the in the asset class have peaked, the current volatility notwithstanding, or there is more blue sky above.
The irrational exuberance will continue so long as governments and regulators do not take Mr. Munger’s advice. Meanwhile, any investment in cryptocurrencies requires an investor to enter the market with their eyes wide open.
Only invest what you are willing to lose, as history teaches that parabolic gains often lead to devastating losses.