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If Bitcoin were the world currency...

 


Today we want to start a mind game with you. What if Bitcoin was the world currency? There is no euro, no dollar, no yen. All goods and services are settled in Bitcoin. The world financial system is based on Bitcoin. Trading is done with Bitcoin.

What would a world with Bitcoin as the world currency look like? And what would the impact be?


The market capitalization

According to the Tagesschau, the gross monetary wealth of the entire world population is 200 trillion euros. This includes bank deposits, cash, securities, pension funds, etc. Real estate and tangible assets are not included. After deducting all debts, the net financial assets are still 150 trillion euros.

It remains unclear how large the share of securities in the 150 trillion is. If you now calculate these out, the assets in Bitcoin remain. Thus, the market capitalization of the Bitcoin would probably be over 100 trillion euros.


trade and business

If the bitcoin were the world currency, all trading transactions would also go through the bitcoin. This would make currency conversions, intermediaries such as banks and high transaction costs obsolete. Global trade would thus become much more efficient. Currency fluctuations and risks that exist for (export) companies would no longer exist.

On a small scale, however, the introduction of Bitcoin as the only world currency would also lead to problems. Where would a Fanta in the kiosk cost 0.000000000X Bitcoin. A conversion or price comparison would hardly be possible


monetary policy

Anyone who knows the financial system of the western world knows that money comes from debt. This debt is priced based on the prime interest rate set by the central banks. This mechanism allows the central bank to intervene in crises and prevent interbank trading from collapsing. In addition, low key interest rates in crises pump money into the market, which gets the economy going again. If Bitcoin were the world currency, this system would no longer exist. The impact of that would be immense.

There could be no monetary response to high inflation. In crises there would be no central bank policy pumping money into the market. Economic crises could become longer and harder as a result. Troubled states such as Italy, Greece & Co could hardly take on new debt at market interest rates, which would probably be influenced by ratings in the case of Bitcoin, since the ECB does not guarantee.


volatility

The previous volatility of Bitcoin would probably drop sharply. Since everything is calculated in Bitcoin and all assets are managed in Bitcoin, the total assets in Bitcoin would be so large that the price could hardly change. In addition, there would be no equivalent currency into which Bitcoin can be exchanged. There would be no exchange rate. You couldn't sell Bitcoin in the classic sense (for euros, dollars, etc.), you could only buy values ​​with Bitcoin. This includes equities, real estate and the like. With a market capitalization of probably more than 100 trillion euros, this would not lead to the volatility that currently prevails.


Conclusion: Bitcoin as a global currency

It is impossible for Bitcoin to ever become the world currency. Not only because states want to retain sovereignty over their own currency, it would probably also be pointless. The negative effects that would accompany Bitcoin as a world currency would be too great. Above all, governments and central banks would lose a key means of combating economic crises. This could send the world economy into a depression for years. The risks of a central world currency are fundamentally too great, since even smaller currencies cannot devalue and export is therefore given up. It would be more possible that Bitcoin, Dollar, Euro & Co will coexist. However, Bitcoin could play a major role in the future.


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