The Crypto Flippening Is Coming — But Not The One You Think
In Cryptoland, “The Flippening” originally referred to a point in time at which Ethereum would overtake Bitcoin in terms of market capitalization. While that Flippening never happened, there are still websites dedicated to that “Flippening Watch”:
I started writing about FAMGA in January, 2017, as their global domination of tech value creation was becoming increasingly apparent. I wrote about the worrying implication of their domination in May 2017, the month before I saw the crypto light. Almost a year later, I penned “Why Crypto’s A Growing Threat To FAMGA” . My most read FAMGA post was “The Coming Epic Battle Between Crypto & FAMGA” (written last September).
My view has been consistent. I don’t think FAMGA are bad companies, or that they’re bad for people. They’ve become dominant because they’re all great capitalists, and they all provide massive value to consumers. But their increasing domination stifles competition and innovation, and comes at a increasing cost to consumers, as they’re the product being sold:
My belief is that the technologies I referred to collectively as “crypto” (blockchain, cryptocurrency, smart contracts, zero knowledge proof..), are enabling new business processes that could provide even greater value for consumers than FAMGA currently does today, while coming at a lower cost (e.g. no loss of privacy).
FAMGA is aware of the threat. They’re developing strategies to compete against native crypto companies to capture the majority of the massive value to be created by crypto. Why wouldn’t they? Just as they’ve captured the majority of tech value of the last five years (see charts below). That’s the “epic battle” I referenced above.
Given the battle is over the capturing of value, the best way to track who is “winning” is to look at value created, or market cap.
FAMGA’s Ever Increasing Value Capture Update
Per the graph below, all FAMGA shares have been growing dramatically faster then the average NASDAQ (IXIC) company over the last five years:
As a result of the faster value creation of FAMGA shares, FMGA has accounted for an ever increasing percentage of the total market cap of the Top 100 companies by market cap:
FAMGA is at their highest percentage of total market cap since I first started tracking it in 2017.
Crypto Market Cap As A % OF Total Crypto-FMAGA Market Cap
If we look back over the last 4+ years, crypto’s market cap as a percentage of the total market cap of crypto+FAMGA, has increased almost 20X to 6.54%:
Crypto’s percentage peaked at 19% on January 7th, 2018.
The Math Necessary For “The Flippening” To Occur
As the various crypto technologies mature, they are going to create massive value. In a recent post, I forecasted that Bitcoin will reach $50,000 in 2024. That would make it worth $1 trillion (assuming 20 million Bitcoin outstanding).
The NASDAQ has returned 6% a year since it’s inception in 1971. Assuming FAMGA grows at that rate for the next five years, it’s market cap will reach $5.2 trillion in 2024.
The chart below outlines the various paths to The Flippening given a $5.2 trillion market cap for FAMGA, different prices for Bitcoin, and the BTC dominance given various prices, that would be necessary for the total crypto market cap to be above FAMGA::
So if BTC hits $50k in 2024, reflecting $1 trillion market cap, the rest of crypto would have to have a market cap of $4.223 Trillion to surpass the forecasted market cap of FAMGA. That would mean a BTC dominance (% of total crypto market cap) of 19.1% ($1T/$5.223T). Bitcoin’s market dominance, per CoinMarketCap.com, currently stands at 56%. As the forecasted price of Bitcoin in 2024 goes up, the non-Bitcoin crypto market cap necessary for The Flippening to occur decreases.
How We Get From Here To The Flippening
We’re doing a lot of what we need to do already. We survived crypto winter. We’re building the infrastructure to enable crypto to scale. The best and the brightest are leaving Goldman and Mckinsey and Google, and coming to crypto. And maybe that will be enough.
But I believe that FAMGA has such massive competitive advantages relating to their unprecedented scale, that they’re well positioned to capture the majority of value from crypto.
The one thing crypto natives have that FAMGA doesn’t, is community. Nobody who doesn’t get paid by Facebook gets up in the morning and wonders how they can make Facebook better. But lots of people are working on Bitcoin and other various other protocols, without getting paid directly, because they see the path to a better world.
So we need to maximize the benefit we get from community. We need to build better incentive mechanisms and better decentralized governance systems, if we’re going to get the most out of community and capture our share of the crypto value creation.
Let’s get to work.
If you got .00001 BTC of value from this post please “Clap” below (up to 50 times). That’s how I get value. Thx!