One thing I often see on the crypto forums and subreddits among newer investors is the confusing of market cap with the amount of money invested in crypto.
It seems most people think that if the crypto market cap is 2.28 Trillion, that means that $2.28 Trillion has been invested in crypto, but this is incorrect…and in fact the real numbers are very far apart.
So confusing these two figures really distorts your perception of the market and the impact of certain factors around the marketplace.
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How much fiat money is invested in the cryptocurrency market total?
Well according to research at JP Morgan, when the market cap was around $300 billion for crypto, the net inflow was around $6 billion. That means that only $6 billion was actually invested, not the $300 billion.
So what is it now? Of course, the calculation is not linear, but for simplicity let’s just say it is. That means the current market cap of $600 billion was the result of approximately $12 billion of net inflow. Although it is probably less due to the properties involved, so my actual guess would be around $8 billion. But for simplicity let’s split the difference and say $10 billion.
That means the entire amount of money actually invested in crypto is only around $10 billion at this point. As you can see, this is much smaller than the market cap of $600 billion. Also, this puts a lot of other factors into new perspective as well.
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