How Much Is Crypto Really Worth?

The true value of the market isn’t what its believers suggest, but it’s nothing to sneer at, either

- Vildana Hajric

It was a $2 trillion wipeout, or so they say. The still-unfolding crypto winter, which leveled an entire blockchain’s eco system, a large hedge fund, a couple of crypto lenders, and an untold number of retail investors, sent crypto’s total market capitalization plummeting to about $1 trillion, from roughly $3 trillion at its peak in November.

Seeing that number made me wonder if market cap—which is just the number of tokens multiplied by each one’s latest price— is a good way to measure the overall size of the industry. Also, given that a vast number of coins have simply vanished and that plenty of projects produced worthless tokens, does market cap really tell us anything about crypto’s economic value?

Central to the market-cap conundrum is that some users sell crypto assets to themselves over and over—this is called “wash trading”—creating the illusion that money changes hands and items are worth more than they actually are. Melania Trump made news earlier this year when it was reported that the winning bid for her first nonfungible token, or NFT, a photo of her wearing a white suit during a 2018 state visit to France, appeared to have come from the former first lady’s own crypto wallet.

So how much of that $3 trillion pile at the height of crypto last year was actually … cash? Could it be that the last crypto boom never even happened? The question of just how big the ecosystem became matters for a number of reasons, not least of which is that a ton of retail investors plunged into crypto thinking it must be safe, since so many others had made money doing so.