18;121.90 dollars per bitcoin – so is it a bubble? Definitely not. How come? As with everything; the price of bitcoin is determined by the ratio of supply and demand. Although supply is still growing slowly; it is limited in advance. And demand? Even that cannot be infinite; as is obvious. But let's look at Bitcoin's current market capitalisation – it roughly corresponds to a large American company. One large company. There are many such companies in the world. Last year's market capitalisation figures: Apple $582 billion; Microsoft $452 billion; Amazon $364 billion; Facebook $359 billion... Bitcoin on Sunday; 17 December – 303 in the morning; 326 in the evening.
Bitcoin's competitor is neither Dash nor Litecoin nor Ethereum. Bitcoin's competitor is the US dollar; the current global currency. The ceiling is set by the size of the global economy. However; with its current market capitalisation of around $300 billion; Bitcoin is still in a completely different league to its "fiat" competitor. The M3 monetary aggregate for the dollar (deliberately; on the pretext that it is too costly to measure) ceased to be published in 2006; when it exceeded $10 trillion. M2 reached this level as early as 2012; after doubling in volume in just ten years.
Despite all the European Commissioners and Putins of the world; the dollar is still the global currency; but most of the world's reserves are not held in dollars. The euro alone; which is far from being the currency of all European Union member states; has a respectable sum of over €11 trillion at the M3 monetary aggregate level. What is today's $0.3 trillion in bitcoins compared to all that?
Bitcoin at $100;000? Quite dry. And then what? It will mainly depend on how much of today's unbacked government money other cryptocurrencies will take a bite out of. Should you buy bitcoins? Definitely; as long as their dollar price is in the tens of thousands; you can rest easy.
Pavel Sikora is intensively involved with bitcoin and is also working on its implementation for ERA clients. He also responded to the current turbulent developments with a commentary for the leading Czech economic daily E15.
