The cryptocurrency market has an overall market cap of $3.2 trillion, with Bitcoin and Ethereum leading. Bitcoin’s market cap is more than half of the entire market, standing at $1.8 trillion. Ethereum comes second with $363 billion, and both digital assets took a hit this week.
A latest report from Redstone Finance highlights that only 8% to 11% of all cryptocurrencies deliver yield to investors. That’s a fraction of the $3.2 trillion, while only $300 to $400 billion generates yield. The rest of the digital assets, which account for 90% of the cryptocurrency market, are losing value.
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Yield-Generation in the Cryptocurrency Market Remains Consolidated
The development highlights that yield-generation in the cryptocurrency market is heavily consolidated. This is in sharp contrast with traditional finance, where 55% to 65% of the assets are yield-bearing instruments. The stock market also compounds faster, while the majority of cryptocurrencies barely deliver anything.
However, the Redstone report argues that the underdeveloped yield-generation in the cryptocurrency market is more of an opportunity than a bane. “This gap is crypto’s greatest opportunity. As the ‘Crypto-as-infrastructure’ thesis gains traction and on-chain finance proves its superior capital efficiency, yield-generating assets are positioned for exponential growth. Institutional capital follows efficiency,” the report states.
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Another negative of the cryptocurrency market is its sharp and extreme volatility. It can swing up dramatically within days, and also cut the gains in an hour. Not everyone can stomach high volatility, as it tests the nerves of investors. However, the entry of institutional funds in the digital assets sector has brought in a fresh sense of enthusiasm.
Moreover, institutional funds are only behind the assets that generate a 10% yield in the cryptocurrency market. That includes Bitcoin, Ethereum, and XRP, among others. They are also staying away from the rest of the market, which covers a major 90% of the sector.