Why Bitcoin should not be compared with companies or payment systems

The site Coinmarketcap, a site that is listing the most popular cryptocurrencies, sorted by market value, is around number 300 in a list of the world’s most popular sites. The market value, the market cap in English, is a term commonly used for limited companies and is simply the company’s total number of shares multiplied by the value per share. This term was quickly absorbed by the crypto world and also led to the total value of a cryptocurrency being compared to the value of a company.

Before Bitcoin, it was just nerdy economists who thought about the total value of a currency, and few of us could make a good guess as to how much in Euro or Dollars were in circulation. In any case, it is perfectly correct to use that number to compare Bitcoin with other currencies, but you must also be aware of the different ways to calculate money. Strictly speaking, the 17 million Bitcoins that exist should compare to the monetary base of other currencies, corresponding to all banknotes and coins, as well as the value of banks’ balances with the central bank, i.e. any money created by the central bank, or central bank money.

A more common measure of the amount of money is M1, which does not include the banks ‘accounts with the central bank, but instead includes all the regular customers’ payroll accounts at the banks, and perhaps better correspond to what you would see as money. One might argue that Bitcoin gives people easier access to the monetary base and that more transactions would happen with that money, while bank money in M1 would lose weight. In that case, maybe Bitcoin should compare to M1?

m1 economy m2 m3

As you notice, it is difficult to compare Bitcoin even with other money, so comparing Bitcoin’s value with the value of a company is even more difficult. Last year we could read in several articles that “Bitcoin is now bigger than Paypal“. There are two issues with this:

  1. Comparing Bitcoin with a company at all. What does Bitcoin mean bigger than Apple or Microsoft? In that case, is it a “big” currency? If you really want to make that comparison, I would highly recommend All of the World’s Money and Markets in One Visualization. Check out “narrow money” to get a feel for how big the world’s total M1 is in relation to the largest companies.
  2. Comparing Bitcoin specifically with companies that handle payments, such as PayPal. “Bitcoin is now bigger than Paypal” seems to suggest that Bitcoin’s payment system is larger / more valuable than Paypal’s payment system, but there is nothing in Bitcoin’s market value that tells us about it. Bitcoin’s market value is slightly different from PayPayl’s market value.

Paypal Bitcoin Cryptocurrency comparison

Last week, PayPal’s former CEO Bill Harris criticized Bitcoin in an CNBC interview and he seems to make a similar mistake, analyzing Bitcoin as a regular business. By trying to fit Bitcoin into his usual framework, he comes to point out things like:

There has to be something underpinning it. Bitcoin makes no revenue, no profitability.

This, of course, is completely irrelevant when we talk about a currency. The US Dollar or Euro also has no earnings or any profit. What sets it apart and easily leads to misunderstandings is that Bitcoin is both a currency and a payment system. In part of the interview, he first talks about currencies:

We’ve got digital currencies. And we’ve got digital currencies that are more stable, more widely accepted, and have intrinsic value. We’ve already got them, they’re called the dollar, the yen, you name it.

Shortly thereafter he mentions the number of transactions per second.

VISA does 50 000. Alipay does 250 000.

All this (except that of intrinsic value) is true but he compares the apples with pears. Yes, the world’s government currencies are largely digital, but the digital variants are usually only available to banks and financial institutions. When we commonly use digital money in everyday life, it’s always in stock on top of the central bank money. VISA could implement Bitcoin support as an underlying currency – there is nothing technically complicated in it – but would we say that Bitcoin can handle 50,0000 transactions per second?


Bitcoin’s main advantage is its characteristics as a currency, so we have to discuss it separately from its role as a payment system. As a currency, Bitcoin has some truly unique features.

It can be used by anyone in the world who has an internet connection, without having to ask someone for permission
It is not controlled by any country or company
It’s transparent. Anyone with sufficient technical understanding can review the system in the smallest detail.
The supply is strictly limited. It’s not just the first time this is possible for a digital asset, the supply is also more predictable than for any existing physical asset.

So why does this matter? One way to see it without ending in political discussions is to take a look at the international currency market, ie the market where you buy, sell or speculate in currencies. This is the world’s largest market, with margins, and the only reason it exists is that people around the world use different currencies. A common neutral currency would eliminate much friction in the system as well as the high costs associated with this and Bitcoin is the best global and truly neutral money we ever had.

A whole new type of money is something very rare and therefore experts in economics, market and finance have difficulty knowing how to analyze the phenomenon. My tip is to see Bitcoin as digital gold and start analyzes with that starting point.