Cryptocurrencies are now worth over $2.5 trillion and have a user base of over 200 million people. Cryptocurrency has become too big for the mainstream to ignore.
Major institutions, like BlackRock, are now taking an interest.
"The rumour is that BlackRock may allow its clients – which include public pension schemes, endowments and sovereign wealth funds – to trade cryptocurrency through Aladdin, the asset manager's integrated investment management platform."
"Over time, we think tokenizing US Treasurys or money market fund shares, for example, means these could all potentially be used as collateral in Defi pools," Lobban said. "The overall goal is to bring these trillions of dollars of assets into Defi so that we can use these new mechanisms for trading, borrowing [and] lending, but with the scale of institutional assets."
Big institutions may have been able to ignore crypto when it had little adoption. However, as cryptocurrency grows, they come under increasing pressure from their clients to take a position.
It's a case of "growing too big to ignore".
Metcalfe's Law states that a network's impact is the square of the number of nodes in the network. In other words, a network becomes more valuable as it grows in size.
One example of Metcalfe's Law is Facebook. Each user invites more users. As Facebook gains each new user, the total value of Facebook's network increases as it gains more and more utility.
Given the significant potential of cryptocurrency networks, influential financial industry players have little choice but to get involved. Multinational institutions are acutely aware of the possibility of snowballing network effects.
The Market Cap Of All Cryptocurrencies
Just how extensive are the cryptocurrency networks?
Market capitalisation is a financial measure computed by multiplying the share price by the number of outstanding shares. In cryptocurrency, it is the price of currencies multiplied by the number of coins in the market.
At the time of writing, Coinmarketcap estimates the global crypto market cap to be around $983.72 billion.
This market cap isn't substantial. Compare it with gold, which has an estimated market cap of $11.572 trillion.
So why all the interest from mainstream institutions?
Crypto is growing at speed. "As far as adoption is concerned, Bitcoin had approximately the same number of users as the Internet in 1997. What is different, however, is that Bitcoin's adoption rate is much higher as compared to the Internet. It is projected that in the next four years, Bitcoin will have around 1 billion users".
It's also being driven from the bottom up. The customers of institutions are demanding it.
Mainstream Pop Culture Adoption
Pop culture is not immune to the growing allure of crypto.
Celebrities like Madonna, Justin Bieber, Jimmy Fallon, Lil Baby, Mark Cuban and Snoop Dogg have been investing in NFTs such as Bored Ape Yacht Club:
"One of the most renowned NFT collections that dominated the trends in 2021 was the Bored Ape Yacht Club (BAYC), which continues to do so. The exclusive collection of over 10,000 unique apes, wearing trendy and funky outfits and posing against colourful, dazzling backgrounds, was created on the Ethereum blockchain."
Cryptocurrency And Government Regulation
For crypto to go mainstream, it will need to be sanctioned by governments. There has been negative sentiment, of course.
Barely a month goes past where China doesn't enact some form of ban on Bitcoin. Environmentalist groups have pointed to the excess energy use involved in mining cryptocurrency. Many regulators are concerned that bad actors might be sidestepping financial controls and taxes. Many people think it's just a massive hype bubble waiting to burst.
However, governments have been moving towards a more constructive approach. Rather than banning cryptocurrencies, the US government has moved to regulate.
"SEC Chair Gary Gensler announced several initiatives to expand investor protections in the $2 trillion cryptocurrency market on Monday. Gensler said the agency plans to register and regulate crypto platforms and will look into separating asset custody. The financial regulator will partner with the Commodity Futures Trading Commission to address platforms trading crypto-based security tokens and commodity tokens".
The crypto community generally welcomes this move. Regulation is another step towards mainstream adoption and helps remove barriers to institutional adoption.
Last year saw a 880% rise in global crypto adoption, according to a report by Chainalysis. This points to the ease with which the retail sector can get into cryptocurrencies. With this level of bottom-up growth, the institutions have little choice but to get on board or they will be left far behind.