The following is a direct excerpt from Marty’s Bent Issue #1217: “Q1 Monetary Base update.” Sign up for the newsletter here.
above Porkopolis Economy
above Porkopolis Economy
Matthew Mežinskis has gifted us with another update to the global monetary base. As of the end of the first quarter of 2022, Bitcoin is the ninth largest base money in the world (including gold and silver). This is two points down from the third quarter of 2021, when Bitcoin was the seventh-largest base currency in the world and was trading at an all-time high. A stumble on the list shouldn’t come as a shock after a roughly 25% drop from this all-time high through the end of March 2021. If the price of bitcoin stays above $27,100 by June 30, 2022, the emerging asset should retain its spot at ninth place on these charts. If it falls below that price (as of May 20, 2022 when the report was published), the Australian cuckoo will take its place.
above Porkopolis Economy
Despite the recent price declines, Bitcoin is in a very strong position compared to the rest of the world’s base currencies. It is stable behind the Swiss franc and the British pound. Many may point out that Bitcoin falls behind on the list and use it as a catch! Moment to confirm their prejudice that bitcoin will never become the world’s reserve currency. However, if you take another look at the chart at the top of this rag, you will see that this is not unusual for the world’s future reserve currency. It makes huge leaps of orders of magnitude up the list, then cools down for a while.
If you look at the chart above, you’ll see that Bitcoin is just an order of magnitude or two away from becoming the world’s largest base currency. It is approaching the top 5 of the pack that dominates the Pareto distribution of global base money. This is an extremely impressive feat for an alien money technology that was dropped on humanity just over 13 years ago.
These orders of magnitude of Bitcoin can be visualized in other ways. I’m sure you’ve heard the idea of ”decoupling” from time to time. Many say there will come a day at some point in the future when Bitcoin will completely “decouple” from stock markets and stop trading in lockstep with the asset class. The reality of the situation is that Bitcoin was decoupled from stocks a long time ago.
Yes, Bitcoin can be very highly correlated to stocks and other assets over a short to medium time horizon, but as you can see from the BTC/NASDAQ ratio chart shared by Tuur Demeester above, Bitcoin makes massive jumps of orders of magnitude in very short time periods during massive ones rallies. And has continued the trend of repeating this ebb and flow since the protocol’s launch in 2009.
As demand increases for an extremely scarce monetary asset that is relatively easy to self-custody and transfer and secure through a globally distributed network of nodes running open-source software, you can expect this trend to continue . When you look at everything that’s going on in the world, especially with governments trying to curb freedoms when they lose control of the money, food and energy systems, it seems like you’re betting that Demand for bitcoin will not only increase but will increase significantly a very low risk bet.
