Cryptocurrency — a life raft for the dollar?
Cryptocurrency capitalization
There are two types of capitalization. Market capitalization — the value of all company securities that are in circulation. And accounting capitalization — the value of the real assets owned by the company. What is the capitalization of cryptocurrencies? Of course, we are talking only about market capitalization. To calculate the bitcoin capitalization, for example, you need to take the number of all issued coins and multiply by the current rate. For example, let’s calculate the bitcoin capitalization in March 2023. A total of 19.326 million coins have been issued. The market rate is approximately 28,000 US dollars. We multiply and get 541,128 billion US dollars. That is, it turns out approximately half a trillion dollars.
According to coingecko, the capitalization of the global cryptocurrency market in April 2023 is 1.2 trillion US dollars which is 38.92% more than a year ago. To date, the market capitalization of bitcoin (BTC) is 530 billion US dollars which represents the prevalence of this currency in the amount of 44.19% of the total supply of coins. Meanwhile, the market capitalization of stablecoins is 132 billion US dollars and represents 10.97% of the total market capitalization of cryptocurrencies.
22% of all world dollars have been issued in a year
Since September 2019 the Federal Reserve System (US FRS) has provided its primary dealers with more than 9 trillion US dollars through massive emergency repos. A recently released report showed that FRS is providing data on daily lending but not informing the public about specific recipients. It is estimated that in 2020 alone the US created 22% of all US dollars issued since the creation of the state.
“The US dollar has been around for over 200 years and has been backed by gold for most of that time,” — one Reddit commenter wrote, adding: The fact that a quarter of all existing US dollars is printed in one year is not only disturbing, but mind-blowing.
REPO loans went to 24 major dealers which are the trading units of major Wall Street banks. In March 2023, the total flow of funds directed to these trading firms was 9 trillion US dollars.
Let’s dream up
But what if one day the dollar kicks the bucket? Yes, they have been talking about it persistently for a long time. But the dollar’s cost is still quite reliable. However, these are no just talks, there are reasons for this: banking crisis which is now actively developing, the ever-increasing external debt of the United States and emission which was mentioned at the beginning of this article. Of course, in case of the dollar default all other reserve currencies will immediately respond with their fall but we will consider the dollar and cryptocurrency only. Bitcoin, of course, will rise in this case. Not only because the value of the entire commodity mass and services will now move from the dollar to bitcoin but also because its popularity as a payment means will increase dramatically.
Total amount of dollars in the world
There are about 36 trillion dollars in total in the world.
If you divide all the dollars by 19.326 million bitcoins you get 1,862 million US dollars for every existing bitcoin. This rate will be set if we replace all the dollars in the world with bitcoins and keep the product offer in the world approximately at the current level.
What if it’s the other way around?
There are wallets in the world that store thousands and tens of thousands of bitcoins. They may belong to the money owners. But what if cryptocurrencies were created in order to prolong the dollar’s life when it gets really bad? For example, if you put up 90% of the cryptocurrency for sale and sell it for dollars then, of course, the dollar rate will grow. After all the entire purchasing power of bitcoin and other currencies will flow into the dollar.
However, a little more than 3% of all world dollars are in the crypt now. And of course, this measure will not save the dollar yet. But in the near future it is quite possible when the bitcoin rate rises many times.
Expertise
Neil J. Rubenking, Lead Analyst for Security*
At the virtual RSA security conference, Dr. Kenneth Geers, External Communications Analyst for Very Good Security, explored this topic, along with Very Good Security’s CISO Kathy Wang. “Is cryptocurrency going to change my life? Change the world?” asked Geers. “Will it bring the end of the nation-state?”
Geers wrapped up discussing problems that cryptocurrency needs to solve, speed being one of them. Visa can process over 70,000 transactions per second, while Bitcoin would manage just a handful. “There’s plenty of interest,” he said, “but societal norms will take time. Risks must be addressed, and speeds must be faster.” He pointed out that after the introduction of the credit card it took Congress 15 or 20 years to enact laws that recognized that technology’s existence.
“There is no doubt that cryptocurrency is a game changer,” stated Geers. “But in the near term, it will not replace the US dollar. In the long term anything is possible, but expect government resistance.”
*Citation from here
Wendy Zamora, Editor-in-chief, Malwarebytes Labs*
Clearly, there is vast potential for cryptocurrency and blockchain technology, from smart contracts to transnational cooperation. Public adoption will become a societal norm, but it’ll take time. The security risks need to be addressed. The speed in the payment system needs to be faster. And governments will need to get involved.
For now, cryptocurrency is an alternate way to invest and save other than being dependent on the US dollar. It could help the rich shift risk and diversify their portfolios, just as it can assist the poor in gaining access to wealth. In fact, El Salvador recently voted to adopt Bitcoin as legal tender alongside the dollar — the first country to do so.
There is no doubt that cryptocurrency is a game-changer. There are over 1,000 different types of cryptocurrencies today, which shows its promise. Blockchain could be as big as the Internet itself. But in the near term, it’s best to hold onto those dollar bills (and debit cards).
*Citation from here
Lado Okhotnikov, CEO of Meta-force.space, former Ceo of Forsage.io*
I think that the historical end of the fiat currency is coming. And we will observe the process of replacing fiat money with cryptocurrency for several decades to come.
The share of cryptocurrency capitalization is really low so far. And this is a fact of the huge potential for growth, but not of the crypt weakness.
Technology does not evolve smoothly. Transitions from one era to another occur in leaps and bounds. I hope that people have already played enough in the revolution. And they will be able to overcome the upcoming transition with maximum comfort. Lado Okhotnikov
*Citation from here
