Is Bitcoin Too Big to Fail?
Market Cap Exceeds Most Large Corporations
Walmart, Proctor & Gamble, Facebook, Home Depot, and Chevron. What do they have in common?
Their market caps are all dwarfed by Bitcoin. That’s right. No typo there. Bitcoin.
At a current market cap of $450 billion, Bitcoin is one of the largest investments in the world. In history. Very few corporations or investment classes exceed the money invested in Bitcoin. As The Talking Heads said, “This ain’t no fooling around.”
Before Bitcoin’s recent price drop, a drop experienced by the stock markets as well, especially tech stocks, Bitcoin’s market cap exceeded $1.3 trillion. That’s right. $1.3 trillion. That’s a lot of zeros.
Apparently, there’s a lot of belief in Bitcoin in the marketplace. A lot of faith. A lot of big money betting on Bitcoin.
Keep in mind, market cap does not necessarily equate to value. But it is an indicator of confidence in an entity or asset and of its future potential.
Who’s Bigger Than Bitcoin?
Apple, Microsoft, Alphabet and Amazon are the biggest market caps in the US, followed closely by Tesla and Berkshire Hathaway. Globally, Saudi Aramco Oil would rank in the top three. Gold is the number one asset class in the world, with a market cap of over $11 trillion. Of course, gold has been around for thousands of years, compared to Bitcoin’s thirteen years. All of the other stocks mentioned above have been around for at least twice as long as Bitcoin.
Still think Bitcoin is a bubble? Tulip bulbs? Tulip bulbs were never valued at nearly a half a trillion dollars. If Bitcoin should regain its all-time high price, it would cap out at around $1.4 trillion. Many Bitcoin analysts predict Bitcoin hitting $100,000 per coin within two years, which would put Bitcoin’s market cap at $2 trillion.
That’s no tulip bulbs.
The point of all this is, some big money is invested in Bitcoin. From players like Elon Musk, Michael Saylor, Tyler and Cameron Winklevoss, Cathie Wood, Kevin O’Leary, and several other household names. That’s good company, pretty successful folks.
So, Is Bitcoin “Too Big to Fail?”
The expression “too big to fail” is usually heard when discussing government bailouts of large companies. Think, auto makers, banks, airlines. The federal government rarely lets these larger companies go under. Businesses that are so deeply engrained in the economy that their failure would be disastrous to the economy in general.
When talking about Bitcoin, however, the expression doesn’t refer to government bailouts. It’s a reference to Bitcoin’s adoption, its market cap, and its general momentum as an asset class.
The broad sentiment regarding Bitcoin is that it is here to stay, that it’s become so big that it likely won’t fail or go away. Here’s a quote from Dave Portnoy, CEO of Barstool Sports:
“Bitcoin has so much money behind it, it's almost too big to fail, almost too big to go away," Portnoy said in an interview on Fox Business Network while attending the Bitcoin 2022 conference in Miami. "So I do believe in it."
Even those who believe that nothing is “to big to fail” concede that Bitcoin is so big now that it’s likely not going away. From Roy Niederhoffer, hedge fund manager and former neuroscientist:
“Nothing is too big to fail, but I suspect Bitcoin’s biggest critics have never used it to perform a transaction. Having that experience makes a huge difference in your comfort level and understanding Bitcoin’s importance.”
The discussion about whether Bitcoin has gotten too big to fail brings to mind a topic that I wrote about several months ago. The phenomenon known as The Lindy Effect goes like this: the longer something stays around, the greater the likelihood that it will stay around for good.
So, every day Bitcoin looks more likely to stick around and become an even bigger asset class.
By the Way, Bitcoin Dwarfs Other Cryptocurrencies:
The Puell Multiple and What it Means
The Puell Multiple is an indicator that analyzes Bitcoin miner profitability as a way of predicting price direction. It compares daily coin issuance to the 365-day moving average of issuance. When mining is profitable, and and more coins are mined, there is incentive to sell coins in order to pay operating expenses. Thus, when the Puell Multiple is high, greater than 4, it signals the top of a market cycle. Lower multiples, conversely, tend to indicate the beginnings of a bull run, as seen in the chart below.
That’s where we currently sit, squarely in the green zone.
The multiple has been extraordinarily accurate in predicting past Bitcoin market cycles, as evidenced by the chart below.
The ratio was created by David Puell, the director of on-chain research at ARK Investments, the firm run by Cathie Wood.
Recommended Bitcoin Tools, Platforms, Podcasts:
Gemini - My choice for buying and HODLing Bitcoin, rated tops for safety and security. User-friendly platform and phone app. Earn Bitcoin rewards as well with the Gemini Credit Card.
Arculus - The crypto hardware wallet from Arculus is one of the best products on the market for storing your coins. Very easy to set up and to use, and very affordable.
Lolli - The Lolli shopping app lets you earn great Bitcoin rewards on practically everything you buy, whether you’re shopping on your phone, computer, or in-person.
Twitter - Follow The Bitcoin Files on Twitter at @BitcoinNewslet1 for all of my articles, commentary and links to my contributions to Bitcoin Magazine.
Medium - Check out my writings on Medium, including articles not featured in the newsletter. Join my 500 other followers who read and write about crypto. medium.com/@rickmulvey
Podcasts - To hear the top names in Bitcoin, and learn more than you could imagine, check out The Pomp Podcast with Anthony Pompliano, What Bitcoin Did with Peter McCormack, and The Wolf of All Streets Podcast with Scott Melker.
Issue No. 68, August 5, 2022
Rick Mulvey is a CPA, crypto consultant, and frequent contributor to Bitcoin Magazine. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.