By Veselin Petkov, Alpari
When the price of bitcoin is rising or reaches new heights, we often see expert commentators in the media comparing bitcoin’s market cap to that of some company. For example, we’ve recently seen headlines such as: “Bitcoin overtakes Goldman Sachs in terms of market cap”, “Bitcoin’s market cap has surpassed that of sports clothing manufacturer Nike”, and so on.
At the time of writing, bitcoin is trading at 6,450 USD, with a market cap of 107.22bn USD according to coinmarketcap.com. People are already debating which companies the crypto market’s flagship currency will overtake next in terms of market cap should the bitcoin continue its growth.
In my opinion, this is a spurious comparison to make. We shouldn’t be comparing bitcoin with banks and other companies. The idea behind bitcoin was to create a transnational, decentralised global currency. The developers behind bitcoin launched this project with the aim of creating an alternative to fiat currencies, which can simply be printed by central banks without limits. So, bitcoin’s market cap should actually be compared to, for example, M1, M2, and M3 money supplies in the US, or with the money supply in the Eurozone, China, and so on. What I mean to say is that bitcoin should be compared to money rather than companies. Bitcoin is not a company and was never intended to be, so comparing the market cap of bitcoin to that of various companies is inappropriate and uninformative.