Sizing Up the Crypto Market Against the Stock and Forex Markets

The market struggled to gain acceptance during its formative years, following the creation of Bitcoin in 2009. However, fortunes have changed recently as institutional investors, regulators, and the wider market continue to warm up to digital assets.

This increased recognition has accelerated their adoption, sparked trading in the crypto market and the development of more diverse digital assets.

More importantly, the crypto market has gained a lot of media coverage lately, both good and bad, that has helped in clearing the shroud of mystery that has plagued the sector for years. Cumulatively, all the activity in and around the crypto industry have played a role in its expansion, with the results showcased by a burgeoning market.

Considering how the crypto market has exploded lately, I thought it would be interesting to find out how it stacks up against the big guns in the financial market.

Before diving in, it’s important to remember that the crypto market is still in its infancy having been around for only a little over a decade. Also, the sector is always setting new records and breaking them continually as it evolves and responds to its challenges.

Crypto Market Overview

On May 12, the total crypto market size hit the $2.5 billion mark, its largest value to date. At the time of writing, it is worth $2.09 billion with Bitcoin alone accounting for 41.5% of this value. Ethereum, the second largest crypto accounts for 18.8% while Cardano is a distant third accounting for 3.65% of this volume. The top 10 coins make up 80% of this volume with the remaining 20% split among the other over 11,500 coins.

Crypto total market cap (Source: Coincheckup)

The crypto market set a record for the highest daily trading volume of $1.6T on May 20 aggregated from over 400 exchanges. This volume fluctuates constantly based on the market sentiment with around $468B worth of crypto traded over the past 24 hours.

Crypto vs Stock Markets

Looking at the above figures, it’s easy to conclude that the crypto market is huge. But, when pitted against the stock and forex markets, you start to notice the differences and realize just how big the global financial market is.

Available World Bank data shows that the total market capitalization for all global stocks stood at $83.53T in Dec 2019. For context, the crypto market was worth about $190B at the time of writing. Interestingly, the stock market was worth $2.5T in 1980, which is the current All Time High (ATH) for the crypto market.

Global stock market size (Source: World Bank)

This value is traded on around 60 stock exchanges globally as compared to over 400 in the crypto market. 16 of these have a market capitalization in excess of $1T which is more than Bitcoin’s current $865B value. Over 87% of stocks are traded on these top exchanges.

The USA dominates the stock market accounting for about 55% of its value with approximately $25T and $22T traded on NYSE and NASDAQ respectively. Both the Shanghai and Euronext stock exchanges have volumes over $7T with $6T traded on Japan Exchange Group.

Largest stock exchange operators (Source: Statisa)

Bitcoin, the largest digital asset, holds its own against the biggest listed companies, being the 7th most valuable asset. It is ranked ahead of some renowned corporations like Tesla, Berkshire Hathaway, Visa, JPMorgan and Walmart.

Crypto vs Forex Markets

If crypto pales in comparison to the stock market, then it’s completely dwarfed by the forex market. Forex is the most liquid and largest financial market with an average daily trading volume of $6.6T and worth $2.409 quadrillion ($2,409 billion).

Put contextually, global GDP was approximately $142T in 2019, making the forex market about 17 times larger. With a crypto market cap around $2.09, it means the forex market is over 1,150 times larger. That’s bonkers!

Despite this huge difference in size, these 2 markets have a few similarities. Both the crypto and forex markets are traded 24/7 while the stock markets are open only during the working hours in the respective jurisdictions. The Classic MT4 platforms dominate Forex trading with over 85% usage with MT5 a distant second with only 6% of the traders. In the crypto market, the cake is more evenly distributed with the 15 Top-Tier exchanges handling around 70% of the entire trading volume.

Similar to the crypto market, there are millions of users spread across the world. The UK is the forex trading hub with close to 300,000 users. Individual users make up only about 5% of the traders in the Forex market, unlike crypto which is dominated by retail traders.

Final thoughts

In all honesty, the crypto market pales in comparison to the stock and forex market. Numbers don’t lie. But, put into context, the enormity of the crypto market starts to manifest. For starters, both the stock and forex markets have decades-worth of a head start during which time they have been able to establish numerous products and services and develop effective risk management systems. These markets are also guided by stringent laws and can count on the guidance of regulators. Subsequently, they have earned trust from both retail and institutional investors evidenced by their huge size and activity.

As far as comparisons go, the stock and forex are like the bigger cousins that crypto looks up to for inspiration in the financial markets’ family. The crypto market is following in their path, emulating the systems that work and innovating new tools that will help it make the quantum leap into the financial markets of the future.

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