Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.
The most popular cryptocurrency is a little hard to determine. By what metric is popularity defined? Price, market cap, the number of times Elon Musk has tweeted about it? And is popularity always a good thing, or is bad press sometimes really just bad press? Sometimes buzz can form around a project that fails spectacularly. The popularity of some new cryptocurrencies, like a coin called Omicron, feeds off of human misery.
So the term is a little fishy, but it’s a popular question and one that deserves a genuine answer. Too many digital coins are advertised as the most important thing in the world but just a few really have traction. In this piece, we provide you with the tools to discern whether a cryptocurrency is really as popular as it makes itself out to be.Buy and Sell Bitcoin, Ethereum, and over a dozen other cryptocurrencies with Wealthsimple. Sign up and Trade here.
The easiest way to determine the popularity of a cryptocurrency investment is to look at its market capitalisation. This is a metric that is calculated by looking at the total number of coins in circulation and multiplying it by the price. There are huge cryptocurrency lists, sorted by market cap, on sites like CoinMarketCap or CoinGecko.
The price alone isn’t a great metric to compare the popularity of cryptocurrencies. Some coins, such as Shiba Inu, are worth tens of billions of dollars, even at a time when a single SHIB token is worth than $0.00008845. This is because there are a quadrillion tokens in circulation. It’s not even that useful to compare a coin’s price against itself, because its circulation can dramatically change over time. Likewise, looking at the number of tokens in circulation does not indicate popularity, because a blockchain developer can allow miners to mint an unlimited number of coins.
As of December 1, 2021, Bitcoin and Ethereum were the most popular cryptos, based on market cap. Bitcoin had a market cap of about $1 trillion. That’s because its price was $57,616 and there were 18.8 million coins in circulation. Ethereum had a market cap of $554 billion, the result of multiplying its price, $4,666, with the 118,566,033 ETH in circulation.
Combined, the total crypto market in December 2021 was worth $2.6 trillion, so Bitcoin and Ethereum alone were worth 56% of the market. The next most popular coin, Binance Coin, had a market cap of $106 billion. Other popular coins include Solana, Cardano, Bitcoin Cash, and Tether. There’s also Litecoin, Chainlink, Sushi, Polkadot, Fantom, and Stellar.
Although people are unlikely to dispute the claim that Bitcoin and Ethereum are the most popular coins, there is reason to be skeptical of using the metric of market capitalisation as a proxy for popularity. Here’s why:
The first is that market capitalisation is simply a multiplication of the most recent price and the total supply. This can be somewhat misleading because a coin could temporarily have a huge market cap if someone jacks up the price for a couple of trades. This is less a problem for liquid assets like Bitcoin and Ethereum and more a problem for illiquid cryptocurrency assets, like non-fungible tokens (NFTs). Some people inflate the price of NFTs by using another account to buy them for lots of money. This process, known as wash trading, makes the NFT look far more expensive than it actually is, encouraging other investors to buy in. In October 2021, someone took out a huge cryptocurrency loan to buy a single CryptoPunks NFT for $532 million, making CryptoPunks look very popular, even though they usually sell for under a million dollars.
Market capitalization has also been criticized because it focuses on all the coins ever created by a single blockchain, even though lots of coins might be out of public circulation after being lost in scams, forgotten about, or by being owned by people who no longer control them, like the imprisoned, deceased, or those who have forgotten the keys to their cryptocurrency wallets. A cryptocurrency market analysis firm called Glassnode estimated in 2020 that about 3 million Bitcoin, or about 16% of all the coins in circulation, are “lost forever.”
One way that analysts have got around this metric is to look at “realised market capitalisation,” which calculates market capitalisation by ignoring the billions of dollars in value left untouched by Bitcoin’s creator, Satoshi Nakamoto, lost coins, or those left in wallets for years and years. By this metric, Bitcoin looks a lot less popular. On October 5, when Bitcoin’s market cap was about $900 billion, Bitcoin’s realized market cap was just $400 billion.
Trading volume is another way to determine the popularity of a coin. This metric describes how much of the coin (in US dollar terms) trades in a given time period. The most common way to assess trading volume is to look at daily trading volume. By this metric, Tether, a stablecoin that tracks the price of the US dollar, is the most popular coin. On December 3, its trading volume was $77 billion. Bitcoin came in second place, trading just half that in the same 24-hour period.
However, trading volume can also be misleading. Again, this is due to the practice of wash trading. This is more noticeable on exchanges rather than individual coins; exchanges, particularly the less reputable types, sometimes trade between themselves (at no cost) to make themselves look popular and boost their positions in volume leaderboards. With coins, projects can also wash trade (see the above example about NFTs), but it is harder to detect. Again, some data analysts adjust daily trading volumes to discount wash trading. In December, Bitcoin’s unadjusted volume was $33 billion but its adjusted volume, according to data analytics site Messari, was just $4.76 billion.
Determining the popularity of a coin by looking at financial metrics can be somewhat frustrating, given that coins and markets are inherently social beasts. Meme coins, for instance, live on attention.
Bloomberg’s Matt Levine described the rise of a coin called Omicron, which rose by several hundred percent in price following the World Health Organization’s naming of the latest strain of Covid-19, even though the project had nothing to do with the virus and only shared its name. Levine’s thesis is that the coin, Omicron, became popular because it was a scarce claim on a non-scarce object (Omicron is just a word, but there are a finite amount of Omicron coins, as dictated by the obscure tokenonomics of the Omicron project). Clearly, Omicron’s success had relatively little to do with the bond-based yield farm on which it was based, and more on the social phenomenon of being able to trade something buzzy.
While price swings, trading volumes, and market caps can capture some of this buzz, they are financial descriptions of social terms. Some companies have attempted to quantify the social buzz and have come up with their own metrics. Lunar Crush has come up with a metric called “social volume” which “represents a coin’s unique mentions across social media.” Whenever someone uses, say, the word Bitcoin, BTC, or $btc on a social media site, Lunar Crush picks it up and adds it to the social volume count. Social volume does not track the flow across networks but simply unique mentions. Other metrics include social impact, which records the “depth of community interaction across social posts.” This metric tracks favourites, likes, comments, and so on, and then weights things by follower count.
There are other ways to check the popularity of a coin. You could check the size of social media groups on Telegram, Reddit, or Twitter, and see if any coins are trending. Some celebrities, including Post Malone, Steve Harvey, and Jimmy Fallon have replaced their profile pictures with NFTs, or non-fungible tokens—cryptocurrency tokens that represent a piece of art.
Another way of checking how popular a cryptocurrency is to check who’s actually using it. One way to work this out is by checking who’s building on it. At a high level, this applies most to blockchains rather than their constituent projects. For instance, Ethereum is clearly very popular because the smart contracts on it hold hundreds of billions of dollars, there’s a huge developer conference every year that is well-attended and hard to get into, and the developers are very active and their decisions are widely reported in crypto media.
There are several metrics you can use to assess this, but some of them can be gamed and they’re not all incredibly reliable.Buy and Sell Bitcoin, Ethereum, and over a dozen other cryptocurrencies with Wealthsimple. Sign up and Trade here.
An obvious way is to look at the number of Github commits; that’s the number of times people have updated its code on Github, a popular coding site. By this metric, as of December 3, Trust Wallet Token was the most popular coin, with 8,223 commits from 99 contributors. Solana is the second most popular, with 4,396 from more than 100 contributors. It’s easy to poke holes in this metric: Older projects, like Bitcoin, may make fewer commits—the network has run smoothly for over a decade and requires less maintenance than a scrappy project forged over the past few months. Second, a commit provides no indication about the size of the update or the vibrancy of the development community. A commit to change the font to Comic Sans is clearly less important than a transition from proof-of-work to proof-of-stake, for instance. Some people contend that the number of commits is easily gameable and that errant developers submit tiny commits to make their projects look more active.
Since the community is often filled with developers and “builders” of various forms, another way to look at the popularity of a project is to look at what’s being built on it. You could, for instance, look at how active a Discord server is—crickets and tumbleweeds suggest that nobody’s using it.
For NFT projects, you could look at the number and scope of derivatives projects. Loot, an NFT project that lays the groundwork for a community-created RPG game, spawned a whole number of derivative projects, including names for characters, storylines, artwork, and tools to assess the rarity and value of unique lists of items such as swords, chain mail and “divine robes.” Lots of these projects have since lost traction and fewer are springing up, suggesting the project is less popular than it used to be when it launched in the summer of 2021. You could also look at high-profile sales within projects, such as virtual real estate sales within Decentraland, brand partnerships for the Brave Attention Token, or new blockchain integrations for Polygon.
For blockchains themselves, you could look at the number and size of decentralized finance platforms. In other words, the size of the projects that are built on top of blockchains. A metric called “total value locked” is the industry standard for this. It records how much cryptocurrency people have placed within DeFi smart contracts, like Aave, 0x, 1inch, Synthetix, Shib and Curve. Money staked within these smart contracts (ideally) generates yield.
As of December 1, 2021, Ethereum was clearly the largest, sucking up $118 billion in TVL, according to research from The Block. Binance Smart Chain is next, with about $21 billion, then Solana with about $12 billion and then Avalanche with $11.96 billion. Again, some people aren’t fans of TVL. Some people think it double- or even triple-counts the amount of value locked in these protocols, and makes protocols that compound yields over time look bigger than they are.
In sum, none of these metrics are perfect. But understanding their pitfalls will allow you to question some of the claims made by cryptocurrency projects and contextualize them correctly. Crypto’s a wild world, one that doesn’t neatly fit into the metrics commonly assigned to it.
Frequently Asked Questions
A cryptocurrency wallet lets you hold cryptocurrencies. Some are web-based (or iPhone- or Android-based) and function a little like online bank accounts (although deposits aren’t backed by government insurance schemes and nobody else can access your money but you). Popular web wallets include Trust Wallet, Argent, and Electrum. Others are hardware wallets. These are like little USB sticks that you plug into your computer each time you want to move your cryptocurrency. Unlike web wallets, hardware wallets aren’t connected to the internet and are therefore considered a little safer. Popular options include Ledger and Trezor.
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