This is probably in the mind of all investors in crypto. At least of those who aren't insiders who know the answer. My own take on this issue comes from the point of view of wealth creation. In my opinion, the use of a market cap indicator is deceiving and misleading. While the number gives a rough idea of how much crypto is worth, it does so mediocrely.
Without claiming to have a clear answer, using a different metric to market cap. Instead, using a "gross crypto product". The GCP would let us understand if crypto is a bubble by how much wealth is created each period. The concept of the GCP lies on the production, which comes from staking, mining, etc. and the price at which these coins are being produced.
Trying to find out the origin of the wealth created by coin creation is the core problem to be solved. For this, we can tell that the basic cost comes from electrical expenses, as well as equipment cost. If a certain currency is valued at 10 dollars, and that same day 2 coins are created, a total of 20 USD worth of that currency was created. From that amount, we still need to subtract the cost of production. If the aggregate cost of mining those 2 coins was higher than 20 USD, that means that something is offsetting that loss.
Let's suppose there are two miners, and each one spends 5 USD every day to get their equipment going. One would expect that these miners would sell their coins at 5 USD/day plus some margin. If only one coin can be mined every day, and they have 50/50 chances of getting the reward, the miners would need to sell 10 USD of coins every day to break even.
However, many people argue that these currencies are worth essentially nothing. So what is the real creation of wealth? It's not those 10 USD every day, but just the marginal increase of the price, which the miners receive. Once the miners get their rewards, they pass on the coin into the market. Once the coin is in the market, the price may go up or down.
The next day, the miner will come back expecting to sell at the usual 11 USD, but he finds out the coin is trading at 20 USD. Those extra 7 USD came from external sources, flowing into the closed crypto markets. With a few calculations, the accounts look like this:
• Miner's: (x_n + 11) USD/day_n - 10 USD/day = x_n + 1 USD/day_n
• Investor's: (sum(x_n)) USD - (x_n + 11)) USD
Each coin is, in some way, worth 1 USD to the miners. The total of m coins are expected to be valued at a minimum of 11*m; each coin worth 11 USD. To this worth we need to add sum(x_n). If the sum converges to zero, the coins will be effectively valued at the aggregate mining costs.
Depending on where the convergence of the sum is, we want that the price stays near the final value. That, of course, would require to know the future, but we could try to use past movements of abandoned cryptocurrencies to better understand the relation between mining costs and final prices.
All in all, I believe that the sum(x_n) for most coins is near zero- most coins are only worth their mining costs. That makes me think that the GCP is in the high side of the cycle, which might lead to a crypto-recession.