When Bitcoin (BTC) topped the $ 14,000 level, its market capitalization exceeded the monetary base of the Russian ruble. This measure includes both physical currencies and bank reserves, usually held by a country’s central banks.
The above chart might seem complicated at first, but it only compares gold, silver, bitcoin, and the remaining global currency bases. We can see that in the U.S. there is $ 4.9 trillion in physical notes, coins, and bank deposits parked with the Federal Reserve. By dividing that number by the currently outstanding 18.5 million BTC, we get the $ 263,000 given above.
For Bitcoin’s market capitalization to match the US base money number, the price would have to exceed USD 263,000. While this seems far-fetched, BTC has already overshadowed several national currencies such as the Brazilian real, the Swedish krona, and the South Korean won.
This step is no small feat for a cryptocurrency that’s only 11 years old. According to Fernando Ulrich, the economist behind Crypto Voices, the top 30 base currency competitors cover 95% of GDP. Aside from the euro, which covers many countries, some of the top 113 peg their currencies to the US dollar.
Researchers at Crypto Voices concluded that:
“So far, the monopoly of money” has “worked” for central banks and their governments. There are practically no costs: fiat money has proven to be virtually “free” from restrictions imposed by the market value of gold. “
The researchers say:
“As for #bitcoin, when it gets big enough to be on this chart and / or in the hands of the central banks, then and only then will we have an idea of what Bitcoin” costs “the central banks.”
Some may interpret the analysis as bearish, but in reality it is the opposite.
Researchers at Crypto Voices conclude that until now central banks and governments have retained their ability to print money regardless of their gold holdings. So there is no pressure to look for a new “gold standard” or anything like that.
As the researchers perfectly summarize, inflation is gradually devaluing fiat currencies. This caused Bitcoin to outperform a number of coins as they were overprinted.. In fact, 2020 saw the longest global base money supply expansion ever recorded.
As clearly shown above, the global money supply increased by $ 5.5 trillion in 2020. This represents an expansion of 28% while Bitcoin has kept its halving plan and reduced its emissions by 50%.
I’m looking forward to
The big question for investors is whether Bitcoin’s stock-to-flow model will prevail. According to some critics, the assumption that BTC will hit $ 100,000 or more in 2021 and beyond has several flaws.
The ruble has fallen, as have many other national currencies, and now all eyes are on the Canadian dollar. As can be seen from the fiat base money supply table, the Canadian dollar monetary base is $ 335 billion, which translates into a bitcoin price of $ 18,000.
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