How big is the growth potential of the cryptocurrency market?

A $2 trillion valuation is huge compared to the size of the cryptocurrency market just a few years ago, and it seems there is still a lot of room for growth. Trillions of dollars in pension funds, trust funds, and brokerage accounts are unable to enter the cryptocurrency market, and once these funds are invested, the crypto market could soar to new all-time highs.

Over the past two years, the cryptocurrency market has seen its valuation rise from around $100 billion to more than $2.5 trillion, a surge never seen before in history. A 2,500% increase in less than two years has also made many investors wary of future price potential.

Currently, the only way to buy cryptocurrency is through exchanges like Coinbase, Binance, and Kraken. Even though there are trusts like Grayscale's Bitcoin and Ethereum Trust or Bitwise's 10 Crypto Index Fund, they are traded at high premiums, sometimes as high as 100%. This means that if someone wanted to buy $100 of Ethereum through one of these trusts, they would need to pay around $200. Therefore, for any investor who values ​​their money, the main way to buy cryptocurrency is through an exchange.

The average retail investor may have no problem creating a Coinbase account and buying $100 in Bitcoin, but for multi-billion dollar institutions and hedge funds, using Coinbase is simply not an option due to regulatory, risk, and custody difficulties. Instead, they prefer to invest in an exchange-traded fund (ETF) that has Bitcoin as its primary asset and is traded on traditional stock exchanges such as NASDAQ. Ideally, this would also protect against hacks and other black swan events.

There are no cryptocurrency ETFs available to U.S. investors yet, but in the future, investors will most likely buy cryptocurrencies through Charles Schwab or Fidelity accounts. Trading cryptocurrencies on traditional exchanges will be a huge opportunity for the market, as trillions of dollars will now be able to flow into this asset class.

For example, there are currently $50 trillion in retirement funds and the top 500 companies generate $33 trillion in revenue each year. If these funds and companies had access to cryptocurrencies and wanted to conservatively invest 10% of their holdings and revenue in this asset, that would be $8 trillion, more than four times the current valuation of the entire market.

A growing market cap will not only increase the value of cryptocurrencies, it will further legitimize them and allow larger investors to get involved. When Bitcoin was only worth $10 million, it was seen as an interesting internet experiment. When it reached $1 billion, it started to look like an interesting investment, but no one could invest more than a few million dollars without a big price adjustment. When it surpassed $1 trillion, investors and companies around the world saw it as the future of money, where billions of dollars could be bought and sold without price fluctuations. If Bitcoin reaches $10 trillion, it will likely become the world's reserve currency, which will make companies and funds more comfortable pouring hundreds of billions of dollars into the asset, promoting its growth and further legitimizing its status.

While there is no guarantee that large foundations will buy cryptocurrencies, they are certainly interested, which is why there are many cryptocurrency ETF applications awaiting approval from the SEC. Even the most conservative investment would be a huge signal that institutions want to put cryptocurrencies into their holdings, and given enough time, cryptocurrencies could easily double, triple, or quadruple in market value. It is uncertain when cryptocurrencies will begin to be traded on traditional markets, but it is considered inevitable and will bring about a new era in the history of digital assets.