Now cryptocurrencies are actually a full-fledged financial asset, there are already cryptocurrency exchanges, for example, CoinBase or Binance, and there is also an instrument of the futures market, such as futures and options.
Thus, cryptocurrencies, and in particular bitcoin, accumulate more and more monetary resources as their popularity grows, but almost no one tries to estimate the volume of these investments.
Most often you can hear conversations about the price of a particular cryptocurrency, first of all. This is not surprising, price fluctuations sometimes amaze the imagination, and the number of people willing to make money on these movements is huge. As you know, the higher the volatility, the higher the excitement, which means that more and more unprepared players are eager to participate in this action.
Suffice it to say that since the beginning of the year, the value of bitcoin has been growing rapidly, adding about 130% at its peak, and in May, in just a month, it collapsed by 50%.
However, a much more important and interesting question is not how much it costs, but how much money is invested in the main cryptocurrency around the world? The answer to this question will give an approximate idea of how significant a role cryptocurrencies occupy in the modern financial world.
The cost of Bitcoin
So, the easiest way is to calculate the total cost of bitcoins. According to CoinMarketCap, as of May 30, 2021, this figure was $653 billion. For comparison, according to Forbes, the fortune of Amazon founder Jeff Bezos, who is the richest man in the world, is estimated at $ 177 billion.
In other words, Bitcoin’s market capitalization is almost four times larger than Bezos’ fortune. However, this does not mean much, since the state of Mr. Bezos on the scale of the global financial system is not such a large sum.
Bitcoin and the money supply
Therefore, in order to understand how much of the world’s money is invested in bitcoin, more complex calculations are needed. To do this, it is necessary to take into account a variety of categories of wealth: cash, precious metals, money market accounts, and so on. However, The Money Project attempted such calculations in May 2020, and they indicated the amount of $ 35.2 trillion in terms of the money supply in a narrow sense.
Money in the narrow sense means the M1 aggregate, with which most of the exchange operations are performed.
From the data of The Money Project report, it follows that bitcoin accounts for about 1.8% of the estimated value of the money supply in a narrow sense.
And here, for more clarity, it is advisable to compare with the M1 money supply in Russia, which, in terms of dollars, is about $ 437 billion, that is, even less than the total capitalization of bitcoin. Given that our country’s economy ranks sixth in the world in terms of purchasing power parity, we can conclude that only bitcoin, excluding other cryptocurrencies, already has significant weight.
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Bitcoin and Gold
However, you still need to look at things more broadly. Some economists still believe that only gold is a real value, and fiat money is just paper. But recently, investors around the world have largely bought cryptocurrencies precisely because of the undermining of trust in fiat money. The world’s largest central banks are printing money uncontrollably, the governments of countries are accumulating immeasurable debt obligations, and the subjects of the financial system have a desire to find an alternative. And now, often, in addition to precious metals and raw materials, cryptocurrencies become such an alternative. By the way, to protect against inflation, investors also actively bought crypto assets, in any case, many experts explained this rapid growth this year.
But to compare bitcoin with gold, you need to first calculate the total value of the precious metal. According to the estimates of the World Gold Council, at the end of 2019, about 197,576 thousand tons of this metal were mined throughout history. On average, about 2.5 thousand tons are mined annually, so by the end of 2020, the estimated volume of gold mined is about 200 thousand tons. There are 32.15 thousand troy ounces in one ton, and the price of gold per ounce was now 1913 dollars.
Thus, the total value of all gold is calculated by multiplying these figures and amounts to $ 12.3 trillion. Consequently, the value of all bitcoins is estimated at 5.3% of the value of all gold.
Bitcoin is the largest and most famous cryptocurrency in the world economy. However, it is far from the only one. If you combine it with Litecoin, Monero, Ethereum and all other more or less significant cryptocurrencies, the total cost will be approximately 1.5 trillion dollars. And this is about 4.3% of the value of money in the narrow sense of M1.
On the one hand, this is a small share, on the other hand, it is very significant for such a young asset, besides, significant amounts are invested in derivatives market instruments tied to bitcoin, but this is not calculable.
But what is even more important is the growth rate of the cryptocurrency market. They are very high, and the use of such assets is constantly growing. The blockchain mechanism is already being used in various kinds of settlements and other operations, the leading payment systems PayPal, MasterCard and Visa are already making payments in bitcoins and other cryptocurrencies.
It can be concluded that cryptocurrencies are unlikely to disappear just like that. Huge funds have been invested in them and continue to be invested, and this is more a sign of a long-term trend than a momentary fever.