Crypto Capital: My Cryptocurrency Fund Thesis

Inception date: Jan 1st 2017

log line: Trust a network, not an entity.

The goal of this letter is to track the market capitalization of the Blockchain ecosystem. This chart shows the value of all crypto coins (or tokens) in existence. Currently ~20 billion USD.


The first crypto coin was Bitcoin. It acts as the reserve currency and dominates the overall market. Known as Bitcoin dominance. Recently bitcoin  was over 95% of the market for crypto coins but notice the obvious downward trend….

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Even though Bitcoin’s price is increasing

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It represents less and less of the total market. That’s because of the new coins that followed it.

This “new money” takes the form of coins which do the same thing as Bitcoin (i.e. Litecoin) as well as coins with new features (anonymous Bitcoin, fast Bitcoin) and new coins (called tokens) which help solve ENTIRELY NEW PROBLEMS (distributed file storage, distributed computing, distributed organizations in general) known broadly as distributed applications. 

These applications provide services we already use (file storage, communication, computation) but now they are controlled by a decentralized network instead of a centralized trusted 3rd party (such as a government or single company). Any changes to these distributed system requires a true consensus whereby all the machines running the network vote on changes. The network holds the state of the system in place. In this world we never have to trust a single entity, only the network.

If we subtract out the value of Bitcoin from the original chart we get the remaining market capitalization of non-Bitcoin coins (called Altcoins). It’s a lovely picture of what happens when a new sector is born…

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The main driver of this Altcoin market value are coins called ether (which underlie the Ethereum network). Ether represents roughly 2b of a 3b altcoin market.

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Ethereum acts as a platform anyone can use to launch new blockchain products and services. Think of it as Blockchain as a service. It’s a network of computers anyone can load applications onto which get “run by the network”. This is has lead to an explosion of ideas for distributed applications which run on top of Ethereum.

Although most money is pouring into platform layer technologies (such as Ethereum). Gradually money is pouring into this application layer as new ideas emerge on how to make distributed versions of existing products and services.

And so when you zoom out, from application layer (Augur, Factom…) to platform layer (Ethereum) to currency layer (Bitcoin, Dash, Zcash…) you end up with 20 billion in value across a global network (Jan 2017)

By 2020 my assumption is this global market for distributed applications (money, data & content) will exceed the market cap of a single moderately sized internet company (~100b). Which implies 5x growth across next 3 years.


In 10 years it’s reasonable to assume this global network would be worth as much as the largest internet companies. Leading to a market cap in the 1 trillion range (~50x growth)

3 thoughts on “Crypto Capital: My Cryptocurrency Fund Thesis”

  1. Great info! Like your thesis with regards to Ethereum exceeding a moderately sized tech company in size. I think this is a conservative, yet realistic approach to assessing the potential short term valuation.


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