The money supply in US dollars is 15 times greater than the capitalization of Bitcoin. The market capitalization of Bitcoin exceeds the money in circulation in Brazil.
According to a study by crypto-analysis firm Ecoinometrics, the boom in the adoption of Bitcoin is the biggest obstacle to an eventual government ban. His claim is based on a comparison between the total circulation of the national fiat currencies of various countries and the market capitalization of Bitcoin.
Ecoinometrics, a firm that focuses on trend analysis of Bitcoin and its role in the world of finance, recently published the study. This research indicates that one of the arguments against Bitcoin is that governments would simply ban it if it became a threat to national fiat currencies.
The study establishes a comparison between the market capitalization of Bitcoin and the total circulation of the fiat currencies of the main countries. According to a chart, the market capitalization of Bitcoin is close to USD 300,000 million at the time of publishing the study, compared to the money supply in different countries.
The analysts clarify that they use as “total circulation” the one known as M1, which includes the estimate of coins and banknotes in circulation and the instruments that people can immediately convert into cash. They express the amounts of M1 in billions of US dollars.
The market capitalization of Bitcoin is not only three times the total circulation of Brazilian reals (BRL) but also exceeds the money supply in Turkey and Denmark. However, the Bitcoin market in the South American country is less than a third of that of countries such as Canada, Australia, or South Korea.
Regarding the total circulation in the UK, it is 10 times higher than the market capitalization of Bitcoin. Meanwhile, the money supply in US dollars, estimated at USD 5.4 trillion, exceeds the market capitalization of the first cryptocurrency by a factor of 15.
In the eurozone, the countries accumulate the most extensive money supply, above China and Japan. All of them are at the top of the scale, marked by USD 10 trillion.
This cap is worth 30 times the market capitalization of Bitcoin and matches the capitalization of gold. Thanks to this separation, the authors of the study can claim that Bitcoin does not currently pose any danger to the global monetary system.
They compare the recent Bitcoin price boom with the 2017 bubble. Furthermore, they highlight that there are currently new circumstances that were not present three years ago. Some of those circumstances are Bitcoin derivatives markets, more custody services for institutions, banks authorized to hold digital assets, companies that use Bitcoin as a reserve asset, and even PayPal’s adoption of BTC. These are factors that deter governments from banning it since this would profoundly affect the economy of many important players.
The study concludes that it will be more difficult to remove Bitcoin from the system if the abovementioned circumstances remain. “When Bitcoin reaches the size of the gold market, central banks may start to worry, but then it will be too late. There would already be too much integration, too much network effect, and too many investors”.
The Winklevoss brothers, founders of the Gemini exchange, have rated Bitcoin as being “better gold than gold” in a comprehensive comparison between the pioneering cryptocurrency and the precious metal. They find several advantages that favor that cryptocurrency. In their study, the brothers conclude that, with the current inflation scenario in the United States, the price of Bitcoin may reach USD 500 thousand.
By Willmen Blanco