Thread by @TheStalwart

THIS IS BITCOIN'S WRONGEST TALKING POINT

In today's @markets newsletter, I wrote about the claim that Bitcoin is now the 5th biggest currency in the world and why comparing its market cap to the "monetary base" of fiat currencies is nonsense.

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@markets CC: @crypto_voices @nic__carter @balajis and the many others who have attempted to compare Bitcoin to fiat in this way.

@markets @crypto_voices @nic__carter @balajis I didn't have space to get into it in the piece. But conceptually just talking about the "amount" of a fiat currency is just not that useful, since it's relatively easy in an endogenous money system to create new money by posting an existing asset as collateral and get a loan

And so if you have to come up with a currency ranking system, you wouldn't do some total extant volume of it, but instead share of transactions or something like that. Because then you're getting some kind of useful measure of its relative importance.

And again, monetary base is really just a reflection of the term structure of government liabilities. Does the central bank want to have long-dated liabilities (Treasuries) or short-dated ones (reserves). Says nothing about the relative size of the currency.