The cryptocurrency asset class reflects the evolution that occurs as technology pushes finance into the future. Cryptocurrencies, digital currencies, and stable coins are revolutionary as they increase transaction speeds and create efficient record keeping. They operate away from governments, central banks, and monetary authorities, returning control of the money supply to individuals.
As the asset class has experienced explosive growth that began with a Bitcoin seed in 2010 to over the $2 trillion level, it remains small compared to other markets. Apple’s (NASDAQ:AAPL) market cap is over $2.5 trillion, making digital currencies a sideshow. However, it is attracting more and more attention each day. Traders and investors flock to bull markets. The potential to make a fortune from a small investment is a magnetic force.
In April and May, the leading cryptocurrencies reached record highs before halving in value by late June. As Bitcoin and Ethereum prices recover, the cryptocurrency asset class is back in the bullish spotlight, and many of the over 11,730 tokens are once again on an elevator higher.
The asset class’s market cap is at the $2 trillion level
It’s been a choppy time in the cryptocurrency markets. Late last week, Ethereum’s price probed over the $4,000 level for the first time since mid-May. After taking the stairs higher since late June, making higher lows and higher highs, Ethereum dropped like a stone on Tuesday, Sept. 7.
The chart illustrates that Bitcoin put in a bearish reversal trading pattern on Sept. 7 as it reached a new short-term high, reversed, and was trading below the previous day’s low.
The overall market cap rose to over the $2.2 trillion level during the first week of September. On Sept. 7, it was sitting at near $2.069 trillion. The high level of volatility in the asset class creates a paradise of trading opportunities but is a nightmare for investors.
The number of tokens continues to rise
While the overall market cap and token values continue to experience massive price volatility, the number of tokens that comprise the asset class continues to move in one direction, higher.
At the end of 2019, there were 4,986 cryptocurrencies, including Bitcoin and Ethereum, in the asset class. On Dec. 31, 2020, the number stood at 8,153. On Sept. 7, 11,732 tokens were floating around in cyberspace. Each day new tokens come to market. The steady growth of the asset class components provides market participants many choices as they search for the next cryptocurrency that will deliver Bitcoin or Ethereum type returns. The bull market in cryptocurrencies has been nothing short of incredible. Meanwhile, the bull market in the number of cryptos is unprecedented.
Ninety-one tokens are in the $1 billion and above club
As of Sept. 7, only 91 tokens or 0.78% of the cryptocurrency asset class had market caps over the $1 billion level. The number of tokens above $1 billion dropped as crypto prices took an elevator to the downside on Sept. 7.
The incredible returns created by Bitcoin, Ethereum, and other tokens over the past years created a speculative frenzy. The growing number of market participants continue to throw money at a wide range of tokens in search of the next explosive move that will turn a small investment into a fortune.
The most important thing for investors to remember is that they should be prepared to lose any capital invested in cryptocurrencies, as the potential for massive financial rewards comes alongside the enormous risk of a total loss. When it comes to trading in the burgeoning asset class, critical mass is a crucial factor. Only the tokens with a sufficient market cap can offer the liquidity for traders to execute buying and selling orders. When the market takes the elevator higher or lower, as it did on Sept. 7, that liquidity tends to evaporate for even the most robust tokens.
Nexo is number 97
Nexo (NEXO) was trading at the $1.64 level on Sept. 8 with a market cap of $930.46 million, putting it in 97th place out of the over 11,700 cryptocurrencies trading in the asset class.
NEXO is a cryptocurrency that powers Nexo’s loaning platform. NEXO has the backing of the underlying assets of Nexo’s loan portfolio. The Nexo protocol is an online platform that enables users to create instant cryptocurrency-backed loans by depositing variant “major” crypto assets into a Nexo wallet.
Nexo’s website states the protocol will “Unlock the power of your crypto.” Nexo is the embodiment of the crypto banking business offering interest on deposits and the ability to borrow cryptocurrencies