A site that lists the most popular cryptocurrencies sorted by market cap is now at around number 300 on the list of most visited web sites, world wide. The term market cap has traditionally been used for the total value of all outstanding shares of a company but was eagerly adopted by the crypto community. This also lead to the value of Bitcoin being compared to the value of companies.

Before Bitcoin nobody except nerdy economists talked about the total value of a currency and few of us would be able to make a good guess as to how many dollars or euros are in circulation. Still, using this number to compare Bitcoin to other currencies is of course fine, though you should be aware of the subtleties concerning money supply. Strictly speaking the roughly 17 million bitcoins in existence should be compared to the monetary base of other currencies, which corresponds to bills and coins held by the public as well as deposits held by banks in their accounts at the central bank, i.e. all the money that is created by the central bank, or the central bank money.

The more widely used measure of money supply called M1 does not include banks’ accounts at the central bank but instead includes customers’ money in checking accounts at the bank and therefore more closely resembles the total of what an average person would consider money. You might argue that since Bitcoin gives the average person easier access to the base money layer more transactions will be made using base money and the second layer bank money will lose importance. In that case, perhaps the value of Bitcoin is better compared to M1?

As you can see, comparing apples to apples is tricky enough so trying to compare the value of Bitcoin to the value of a company is even harder. Last year several articles proclaimed that “Bitcoin’s now bigger than Paypal”. There are 2 problems here: