Chronicles of an Allocator

June 2023: Beyond Bits and Bytes: Unraveling the Paradox of Digital Assets

Issue 40, June 2023

Authored by Steven Novakovic, CAIA, CFA

In nearly 15 years, the universe of digital assets has grown from an idea presented in a whitepaper by an unknown author, to a global ecosystem full of promise, potential and tangible value. The services and applications provided by digital assets are broad, varied, and numerous. Measuring the value of the ecosystem is a near-impossible task as the universe spans private companies, public companies, decentralized organizations, coins, tokens, and other applications.

According to, the global crypto market capitalization is approximately $1.1 trillion, two-thirds of which derives from Bitcoin and Ethereum. This number predominantly represents tradeable coins and does not capture the value of the many other components of the digital assets universe. Even with this incomplete data, the numbers are astounding. If the digital asset universe was a publicly traded stock, it would be amongst the 10 largest equities in the world, occupying an elite space in the $1 trillion+ club. Looking at this list of $1 trillion market cap companies reveals an expected and relatable group:

  • Apple
  • Saudi Aramco
  • Microsoft
  • Alphabet
  • Amazon

Each of these companies is weaved into the everyday lives of most citizens across the globe — if not as a direct customer, they likely encounter a business that utilizes a service provided by the companies on that list.

Yet digital asset global penetration remains quite low, whether measured on a direct or indirect basis. This is not to say that digital assets do not merit their current valuation or that they should have as large an impact on the global economy as these other 1 trillion dollar businesses.

Rather, it is to point out how many people out there do not use or have expertise in cryptocurrencies and digital assets (although digital assets has brand recognition approaching these companies).

Why is this the case?

Certainly, a major element is the newness of this asset, with Bitcoin launching in 2009 and Ethereum following six years later. Although it is worth noting that Facebook launched only five years before to Bitcoin and has nearly 3 billion users and previously occupied the rarified space of $1 Trillion companies.

Instead, digital asset adoption and expertise (or the lack thereof) is more likely to do with a handful of challenges including:

  1. Complexity of the technology – understanding blockchain is challenging. On top of that, investors must filter through the thousands of tokens, coins, and other applications. Some of which may have high potential, while others have dubious use cases at best.
  2. Non-traditional means of accessing the ecosystem – for institutional investors, investing in digital assets requires additional infrastructure and operational expertise. The ecosystem to support institutional investors has only recently been developed as the digital asset market was originally fostered by and catered to the retail world.
  3. Seemingly endless headline risks – Crypto winter. Mt. Gox. Terra Luna. Rug Pulls. ICOs. Stolen Wallets. FTX. Three Arrows Capital, Silvergate Capital. The Wormhole Hack. SEC Lawsuits. The list goes on . . .