Bitcoin Is 3rd Largest World Currency: Deutsche Bank – Decrypt

Since its inception just over a decade ago, bitcoin (btc) has seen its price rise from virtually nothing to its current value of over $59,000.

At that time, bitcoin’s market capitalization (its circulating supply multiplied by the value of each unit) has ballooned to over $1 trillion, making bitcoin not only the largest cryptocurrency, but also larger than most government fiat currencies.

Reading: Bitcoin 5th largest currency

now the german bank crowns bitcoin as no. 3 world currency and calls it “too important to ignore,” in a new research note this week titled “The Future of Payments: Series 2: Part III: Bitcoins: Can the Jingle Bell Effect Become a Self-Fulfilling Prophecy?” /p>

but the report has serious caveats and omissions.

The German bank writes, “In terms of total currency in circulation, bitcoin is the third largest in the world, after the US dollar and the euro. This is mainly due to the large increase in the value of bitcoin recently. As of 2019, bitcoin accounted for ‘only’ 3% of US dollars in circulation, but in February 2021 it exceeded 40% of US dollars in circulation.”

bitcoin and fiat currencies are not an apples to apples comparison, for several reasons that db acknowledges in its note, including that bitcoin is in a fixed supply (capped at 21 million coins), while fiat currencies of the government yes. No. still, db is roughly estimating where bitcoin ranks in the global currency rankings by comparing its coin market capitalization to the total value of notes in circulation for fiat currencies.

db warns in a footnote that these classifications “would change dramatically if we looked at base money, or m1 or m2, to define the universe of usd in existence. just the amount of cash/currency printed seems small, as it is not to include all assets held in usd on deposits in banks.”

See also: Cryptocurrency exchange script and Bitcoin exchange software to instantly start a Bitcoin Exchange

And of course, bitcoin’s market capitalization depends on its current price, which is constantly fluctuating. as db declares, “bitcoin is here to stay and its value will continue to be volatile.”

but there is another big caveat with the db graph above. Do you notice that any important coins are missing? the chart and report omits the Chinese yuan (cny) entirely.

This is likely because China maintains strict capital controls that make the yuan not freely convertible, and the difference between the onshore and overseas yuan has widened, all of which make it not easy to arrive at the circulation volume of the yuan in this context.

That said, according to publicly available estimates, there may be around 9.19 trillion yuan in circulation, with a circulation value of $1.41 trillion. this would place cny third and bitcoin fourth. (decrypt reached out to analysts at deutsche bank for an explanation as to why the bank did not include the Chinese yuan in this research report.)

where does bitcoin fit in the world currency ranking

The US dollar (USD) remains by far the largest fiat currency by current supply and market value. db puts its total circulation value at $2 billion.

According to the United States Federal Reserve, there are $1.8 trillion worth of Federal Reserve notes and coins in circulation, more than three-quarters of which is made up of $100 and $20 bills.

next is the euro (eur), a relatively new currency that was first launched in 2002 and is now used throughout much of europe and most eu member states.

See also: What Is DeFi? | NextAdvisor with TIME

Like the United States Federal Reserve, the European Central Bank maintains an up-to-date reference of the amount of euro banknotes and coins entering circulation. according to official statistics, there was just over €1.43 trillion in circulation at the last update (March 2021). this has more than tripled since the euro was first launched, and the total value is mostly made up of €20 and €50 notes.

the japanese yen (jpy) is not far behind in fourth place (after bitcoin) with at least 118.3 trillion jpy notes and coins in circulation as of the last bank of japan update, or just over below $1.09 trillion when measured against the dollar.

The Indian Rupee (INR) currently has over 34 trillion inr worth of notes in circulation, worth just over $469 billion.

Bitcoin currently has 18.66 million units in circulation, each worth $59,000 at the time of writing. This puts bitcoin’s m0 (money supply) cap at $1.1 trillion, narrowly beating the Japanese yen and standing at just over half the size of the US dollar. At its current market capitalization, bitcoin has a money supply worth more than 170 different fiat currencies.

But transaction volume is something completely different from market capitalization.

The German bank notes that bitcoin transactions “are growing, but not as exponentially as its market capitalization. Currently, bitcoin transactions average around 500 million per day, which is miniscule. This is only 0 .02% of the euro and 0.009% of transactions in dollars, the average daily value traded for usd is 5.8 trillion and for the euro it is 2.1 trillion, according to the 2019 bi-triennial fx survey. Therefore, bitcoin is comparable to smaller currencies. Bitcoin’s liquidity is much closer to the Thai baht.”

With its current market capitalization of $1.1 trillion, bitcoin would need an additional 82% price growth to become the world’s largest currency (cryptocurrency or otherwise) as measured by the value of circulation.

See also: Why were there so many crypto ads during the Super Bowl?

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button