Bitcoin has achieved market capitalization close to some of the biggest corporations, ranging between $100 and $300 billion. But taken in proportion to the size of the worlds financial system, BTC may have a different valuation.<\/p>\n
The bloated worldwide debt, fueled by extreme quantitative easing in the last decade, will reach $255 trillion by the end of the year, reported Reuters. The analysis of the Institute of International Finance estimates each person on the planet would carry $32,500 in debt.<\/p>\n
With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year, the IIF said in a report.<\/p>\n
Due to bitcoins limited supply, it is possible to chart the size of global debt-fueled finance in BTC terms. One bitcoin (as per current aggregated supply) will have to be worth over $12 million to describe the size of the worldwide debt.<\/p>\n
The growth of debt comes from governments and government companies, as well as non-financial businesses. A debt bonanza analysis by Bank of America Merill Lynch shows that government debt has ballooned by $30 trillion, companies added $25 trillion, households $9 trillion and banks $2 trillion. All of that additional debt has been accrued since the bankruptcy of Lehman Brothers in the fall of 2008.<\/p>\n
Instead of entering a decade of stagnation, central banks poured in liquidity to boost all sectors, leading to significant asset valuation growth. In spite of that, the financial sector carries debt which is 240% of the worlds gross domestic product.<\/p>\n
It is somewhat difficult to reconcile the idea of sound money, which BTC aims to be, with a debt-fueled economy. But in a way, the current market price of bitcoin reflects the fact that not all funds in circulation are sound, and that debt-based economic activity has been the chief driver of asset valuations in the past decade.<\/p>\n
If bitcoins value was matched to real economic output, it would be about 60% lower, at around $4 million per BTC. But the presence of debt skews nominal prices.<\/p>\n
This potential BTC price has far outpaced the historical highs of the coin. Based solely on the crypto market, bitcoin has peaked around $20,000 in Korea, and at $19,600 in other markets. Some predictions see bitcoin price going to $50,000 again. Experts admit BTC would have reached higher bids if the futures markets did not start swaying the price as well.<\/p>\n
What do you think about the relationship of bitcoin to worldwide debt? Share your thoughts in the comments section below!<\/p>\n
Image via Shutterstock<\/p>\n
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