March 29, 2024

Bitcoin and national currencies

One of the constantly repeated arguments for why Bitcoin might fail isis that if it becomes a threat to national currencies, it will simply be banned.But how real is that?

To understand where we are now, let's start by comparing Bitcoin's capitalization to the money supply of various national currencies.

Mirfia's currency is so simple.Ask a simple question - for example, "How many U.S. dollars are in circulation?" and the answer is likely to besomething like "How to look."

Central banks have several optionscounting. There is money (M1), there are money surrogates — quasi-money (M2), there are highly liquid surrogates of these quasi-money (M3)… And then there are offshore systems like the Eurodollar, which make it even more difficult to track how much money is in circulation.

But let's not complicate things and focus only on the M1.

The M1 money supply corresponds to the narrow definition of money.be immediately redeemed for them.

This M1 money supply can be roughly compared to the total number of bitcoins in circulation or physical gold on the market.

Today, Bitcoin's market capitalization is about $300 billion.This is more than the M1 money supply of Brazil, Turkey or Denmark.

But this is not a very large number. This is:

  • 3 times less than The M1 of South Korea;
  • 10 times smaller than the UK M1;
  • 30 times less than China's M1 or the Eurozone.

Check it out:

The M1's money supply is in the billions of US dollars (on a logarithmic scale).

One thing is quite clear: at its current size, Bitcoin does not lookthreat to the world's major currencies.

But give it another halving cycle, and you can expect his capitalization to reachsize of the physical gold market, which is 30 times its current value.

So should we worry about, say, banning U.S. private ownership of bitcoins in the next 10 years?

I don't think so.evolve about as follows.

The current trend is rather towards greater integration of Bitcoin into the global financial system.And it will last for a while.

Think about the evolution that has taken place since 2017.

Regulated derivatives markets have emerged,custodial services for companies, banks are allowed to own digital assets, companies use Bitcoin as a reserve asset, you can even buy BTC through PayPal…

The longer it lasts, the harder it will be to rip Bitcoin out of the global financial system.

When Bitcoin's capitalization is equal to the size of the gold market, central banks canStart worrying, but it will be too late.already too integrated into the economy, the network effect will be too strong, too many people will invest in it.

Don't get me wrong.Bitcoin.Most likely, central banks will release their digital currencies, and they willdesigned so that the average citizen could not easily exchange them for bitcoins.

But wealthy people, those who have already invested in Bitcoin, or large institutions will always findSo in this fight, governments can'tWin.

Bitcoin is designed to be inherently anti-fragile, and the bigger it will bebecome a network, so it will be more stable.

As Raoul Pal said, Bitcoin is an indestructible cockroach from finance: it is there and you cannot get rid of it.

 

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