07 Jan 2021 Marsha Tusk
Crypto Market Cap Reaches $1 Trillion Amid Gas Fees Crisis
The crypto industry managed to surpass another milestone in its history – for the first time ever, the sector recorded $1 trillion in market capitalization. The move above $1 trillion in market cap puts the crypto industry on par with some well-established industries like the pharmaceutical.
In 2020, the crypto sector experienced a five-fold increase in market capitalization, mostly due to extensive institutional investor interest, trend-following quant funds, and a strong retail speculator presence.
The primary moving force for the crypto sector’s massive market cap surge is Bitcoin, which rose to an all-time high of $38,458 on Thursday, January 7. The leading cryptocurrency to date recorded a quadruple price increase since the start of 2020. Also, Bitcoin’s dominance over the altcoin sector remains close to 70%, with Ethereum recording a mere 13% of the entire market capitalization of the crypto sector.
Geoffrey Morphy, president of Canadian crypto mining company Bitfarms Ltd, noted that “the more that people perceive that their assets, particularly their liquid assets such as fiat currencies are eroding in value, the more they will look for alternatives.”
Furthermore, active Bitcoin addresses are in the foothills of an all-time high, recorded in late 2017, when Bitcoin made its first move above $20,000. Researcher Flipside Crypto noted that the activity may be a sign that some investors are willing to sell their Bitcoin. But with 2% of the active addresses holding 95% of Bitcoin’s current supply, a possible sell-out may impact both the prices and the market capitalization of the entire sector.
Some analysts are considering JPMorgran’s prediction of $146,000 per Bitcoin at the end of 2021 to be among the biggest price increase catalysts. However, as Cryptobrowser.io reported, a U.S. regulatory update allowing stablecoins and blockchains to be used by banks for payments may also be a reason for the massive interest in the crypto sector.
Meanwhile, DeFi exchange Uniswap recorded that the total liquidity levels on its platform surpassed $3 billion, which mitigates the major liquidity decline over the past three months. Uniswap’s founder Hayden Adams announced the news on Twitter, adding that the liquidity surge is “without UNI liquidity mining incentives.”
The liquidity push, combined with Ethereum’s upwards price trends, is generating a real-life gas fees crisis, as transaction costs on the Ethereum blockchain reached $16 on January 4. However, gas fees made a slight retreat, and the current average transaction costs of around $9, which puts stress on low-tier investors and anyone shifting small amounts of Ethereum-based products.
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