NFTs are just the beginning of the Crypto Wealth Splash

We're about to find out what trillions of dollars of highly concentrated liquid wealth can do.

A friend just came back from NYC. “It’s insane,” he told me. “Everyone is just talking about their NFTs.” Nor was this a particularly tech-heavy social scene; artists were hawking their own art as NFTs, and regular folks were cooking up schemes to profit off the boom. “They’ve won,” he said. “Crypto is everywhere.”

And it occurred to me — though not for the first time — that this is just the beginning. The effects of crypto wealth have only begun to make themselves felt in our society and our economy. More is on the way. When some people look at NFT culture they see a scam or a Ponzi scheme; others see the glimmer of a bold new web3 that will transform how we live.

What I see is the tip of a very very big iceberg. And the iceberg is made of money.

The pandemic years have seen multiple enormous wealth creation events, and crypto is one of them. In mid 2020, the total market capitalization of all cryptocurrencies was estimated at around a quarter of a trillion dollars; since then, it has risen to $2 trillion:

Bitcoin, the original crypto, represents less than half of this total.

This is an absolutely enormous amount of wealth — almost 4% of the entire value of all U.S. public companies — that just appeared out of nowhere when people decided crypto was worth more than before. It’s extremely liquid by now. And crypto wealth is extraordinarily concentrated — a year ago, it was estimated that Bitcoin “whales” owned over 70% of all Bitcoin (about $579 billion at today’s price). Other cryptocurrencies like Ether are also believed to be extremely concentrated in the hands of a few super-rich owners.

These crypto whales are so rich that even they probably can’t comprehend it. Surely, they don’t mind spending just a little bit of their vast fortunes, especially since most of them are probably crypto bulls who expect their wealth to keep increasing exponentially anyway. Life is short, and there’s no point in dying on the world’s biggest pile of digital gold. If the whales own 70% of crypto, and decide to spend just 5% of their holdings this year, that’s $70 billion in new spending — perhaps not enough to materially contribute to inflation, but enough to absolutely transform slices of the economy. The artists and scam artists running around hawking NFTs in New York Bars are just one example.

And as crypto’s market cap grows and whales decide to loosen their wallets, we could see effects far beyond anything we’ve seen from the NFT boom so far. So let’s think a little about how much wealth might get splashed on the economy in the years to come, who will get it, and how it’ll change our society.

How much wealth are we talking about here?

The first question is a fairly standard one: How much bigger will crypto wealth get?